Bright Fashions is a clothing store that sells men's shirts. Their variable cost per shirt is $22, and the sales price is $42. Bright Fashions plans to sell 450,000 shirts for the year, and they expect a before-tax profit of $3,000,000 at this volume. Additionally, they received an extra $15,000 from the sale of an old company vehide. What is the degree of operating leverage (DOL) at this volume level? Cosmos Enterprises provides the following partial income statement: Sales: $1,500,000 Less: Variable costs: $700,000 Contribution Margin: $800,000 Less: Fixed costs: $350,000 Maintenance Costs: $50,000Net Operating Income: $450,000 Requirement: What is Cosmos Enterprises' degree of operating leverage? Options: 1.57 4.38 1.86 2.00

Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 16E
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Bright Fashions is a clothing store that sells men's shirts. Their variable cost per shirt is $22, and the sales
price is $42. Bright Fashions plans to sell 450,000 shirts for the year, and they expect a before-tax profit
of $3,000,000 at this volume. Additionally, they received an extra $15,000 from the sale of an old
company vehide. What is the degree of operating leverage (DOL) at this volume level? Cosmos
Enterprises provides the following partial income statement: Sales: $1,500,000 Less: Variable costs:
$700,000 Contribution Margin: $800,000 Less: Fixed costs: $350,000 Maintenance Costs: $50,000Net
Operating Income: $450,000
Requirement: What is Cosmos Enterprises' degree of operating leverage?
Options:
1.57
4.38
1.86
2.00
Transcribed Image Text:Bright Fashions is a clothing store that sells men's shirts. Their variable cost per shirt is $22, and the sales price is $42. Bright Fashions plans to sell 450,000 shirts for the year, and they expect a before-tax profit of $3,000,000 at this volume. Additionally, they received an extra $15,000 from the sale of an old company vehide. What is the degree of operating leverage (DOL) at this volume level? Cosmos Enterprises provides the following partial income statement: Sales: $1,500,000 Less: Variable costs: $700,000 Contribution Margin: $800,000 Less: Fixed costs: $350,000 Maintenance Costs: $50,000Net Operating Income: $450,000 Requirement: What is Cosmos Enterprises' degree of operating leverage? Options: 1.57 4.38 1.86 2.00
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