Operating income for PQR company is $20,000, variable cost per unit is $6, number of units sold are 10,000 and sales price per unit is $10, degree of operating leverage for PQR will be: Select one: a. 2 times b. 4 times c. 3 times d. 1.5 times

Operating income for PQR company is $20,000, variable cost per unit is $6, number of units sold are 10,000 and sales price per unit is $10, degree of operating leverage for PQR will be: Select one: a. 2 times b. 4 times c. 3 times d. 1.5 times

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

Operating income for PQR company is $20,000, variable cost per unit is $6, number of units sold are 10,000 and sales price per unit is $10, degree of operating leverage for PQR will be:

Select one:

a. 2 times

b. 4 times

c. 3 times

d. 1.5 times

Expert Solution

Step 1

Unit Contribution margin

= Selling price - Unit Variable cost

= $10 - $6

= $4

Contribution margin

= Unit Contribution margin x Units sold

= $4 x 10,000

= $40,000

Step by step

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Calculate the Operating Leverage for a business given the following data: Sales = $300,000.00 Variable Costs = 75% of Sales Operating Income = $40,000.00 Group of answer choices a. 0 b. 7.500 c. 1.875 d. 1.333
Munabhai
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• Use the below information to fill out the income statement and answer the questions 4-10 below: Selling Price per Unit Number of Units Total Dollars Sales Revenue $40.00 Variable Costs |600,000 Contribution Margin Fixed Costs 240,000 Net Income If OPEARATING LEVERAGE is 5 4. What is Net Income ?