Cullumber Sports Hut provides individual instruction and coaching to children participating in the city's baseball, softball, basketball, and soccer youth leagues. Last year's results were as follows: Sales revenue $810,000 Variable expenses 558,900 Contribution margin 251,100 Fixed expenses 170,100 Operating income $81,000
Cullumber Sports Hut provides individual instruction and coaching to children participating in the city's baseball, softball, basketball, and soccer youth leagues. Last year's results were as follows: Sales revenue $810,000 Variable expenses 558,900 Contribution margin 251,100 Fixed expenses 170,100 Operating income $81,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
If Anna Cullumber, the company’s president, is successful in increasing sales revenue by 5%, by what percent will the company’s operating income increase?
Transcribed Image Text:Cullumber Sports Hut provides individual instruction and coaching to children participating in the city's baseball, softball,
basketball, and soccer youth leagues. Last year's results were as follows:
Sales revenue
$810,000
Variable expenses
558,900
Contribution margin
251,100
Fixed expenses
170,100
Operating income
$81,000
Expert Solution
Step 1: Introduction to Leverage
Operating leverage helps to calculate change in operating income if sales or revenue is increase by some margin. It help to identify how much volatile company's operating income is when sales are increased by some margins.
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