Answered: If sales are $314,000, variable costs…

Business

Accounting

If sales are $314,000, variable costs are 75% of sales, and operating income is $44,100, the operating leverage is

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

If sales are $314,000, variable costs are 75% of sales, and operating income is $44,100, the operating leverage is:

- a. 0.0
- b. 5.3
- c. 1.8
- d. 1.3

Expert Solution

Step 1

Operating leverage means the measurement between the contribution margin with the earning of the company. This ratio actually guides the company that from which degree the project of the company can earn more by increasing the revenue.

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