Sandy sells authentic Amish quilts on her website. Suppose Sandy expects to sell 1,200 quilts during the coming year. Her average sales price per quilt is $275, and her average cost per quilt is $175. Her fixed expenses total $60,000. Compute Sandy's operating leverage factor at an expected sales level of 1,200 quilts. If sales volume increases 10%, by what percentage will her operating income change? Prove your answer by calculating operating income at a sales volume of 1,200 and at a sales volume of 1,320. Compute her operating leverage factor. (Round your answer to two decimal places.) First, identify the formula, then compute the operating leverage factor. Contribution margin + Operating income 1 = Operating leverage factor
Sandy sells authentic Amish quilts on her website. Suppose Sandy expects to sell 1,200 quilts during the coming year. Her average sales price per quilt is $275, and her average cost per quilt is $175. Her fixed expenses total $60,000. Compute Sandy's operating leverage factor at an expected sales level of 1,200 quilts. If sales volume increases 10%, by what percentage will her operating income change? Prove your answer by calculating operating income at a sales volume of 1,200 and at a sales volume of 1,320. Compute her operating leverage factor. (Round your answer to two decimal places.) First, identify the formula, then compute the operating leverage factor. Contribution margin + Operating income 1 = Operating leverage factor
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Sandy
sells authentic Amish quilts on her website. Suppose
Sandy
expects to sell
1,200
quilts during the coming year. Her average sales price per quilt is
$275,
and her average cost per quilt is
$175.
Her fixed expenses total
$60,000.
Compute
Sandy's
operating leverage factor at an expected sales level of
1,200
quilts. If sales volume increases
10%,
by what percentage will her operating income change? Prove your answer by calculating operating income at a sales
volume of
1,200
and at a sales volume of
1,320.
Compute her operating leverage factor. (Round your answer to two decimal places.)
First, identify the formula, then compute the operating leverage factor.
Contribution margin + Operating income
||
=
Operating leverage factor
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