Operating leverage: It is a ratio that measures the proportion of fixed cost on the total costs and the extent to which the changes in the sales volume affects the income from operations. It shows the relationship between the contribution margin and income from operations. The formula to calculate the operating leverage is as follows: Operating leverage = Contribution Margin Income from operations To determine: T Company’s operating leverage

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Answer 1

Question

Chapter 19, Problem 19.6BE

To determine

Operating leverage: It is a ratio that measures the proportion of fixed cost on the total costs and the extent to which the changes in the sales volume affects the income from operations. It shows the relationship between the contribution margin and income from operations. The formula to calculate the operating leverage is as follows:

Operating leverage=Contribution Margin Income from operations

To determine: T Company’s operating leverage

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Sterra Ltd. buys on credit terms of 3/10, net 50, and it always pays on the 50th day. The CFO reports that the company carries an average of $462,000 in costly trade credit. What is Sterra’s average accounts payable balance? Assume a 365-day year.

Answer 2

Question

Chapter 19, Problem 19.6BE

To determine

Operating leverage: It is a ratio that measures the proportion of fixed cost on the total costs and the extent to which the changes in the sales volume affects the income from operations. It shows the relationship between the contribution margin and income from operations. The formula to calculate the operating leverage is as follows:

Operating leverage=Contribution Margin Income from operations

To determine: T Company’s operating leverage

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Answer 3

Question

Chapter 19, Problem 19.6BE

To determine

Operating leverage: It is a ratio that measures the proportion of fixed cost on the total costs and the extent to which the changes in the sales volume affects the income from operations. It shows the relationship between the contribution margin and income from operations. The formula to calculate the operating leverage is as follows:

Operating leverage=Contribution Margin Income from operations

To determine: T Company’s operating leverage

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Answer 4

Question

Chapter 19, Problem 19.6BE

To determine

Operating leverage: It is a ratio that measures the proportion of fixed cost on the total costs and the extent to which the changes in the sales volume affects the income from operations. It shows the relationship between the contribution margin and income from operations. The formula to calculate the operating leverage is as follows:

Operating leverage=Contribution Margin Income from operations

To determine: T Company’s operating leverage

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Answer 5

Chapter 19, Problem 19.6BE

To determine

Operating leverage: It is a ratio that measures the proportion of fixed cost on the total costs and the extent to which the changes in the sales volume affects the income from operations. It shows the relationship between the contribution margin and income from operations. The formula to calculate the operating leverage is as follows:

Operating leverage=Contribution Margin Income from operations

To determine: T Company’s operating leverage

Answer 6

Chapter 19, Problem 19.6BE

To determine

Operating leverage: It is a ratio that measures the proportion of fixed cost on the total costs and the extent to which the changes in the sales volume affects the income from operations. It shows the relationship between the contribution margin and income from operations. The formula to calculate the operating leverage is as follows:

Operating leverage=Contribution Margin Income from operations

To determine: T Company’s operating leverage

Answer 7

Chapter 19, Problem 19.6BE

To determine

Operating leverage: It is a ratio that measures the proportion of fixed cost on the total costs and the extent to which the changes in the sales volume affects the income from operations. It shows the relationship between the contribution margin and income from operations. The formula to calculate the operating leverage is as follows:

Operating leverage=Contribution Margin Income from operations

To determine: T Company’s operating leverage

Answer 8

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Answer 11

Ch. 19 - Describe how total variable costs and unit...Ch. 19 - Which of the following costs would be classified...Ch. 19 - Describe how total fixed costs and unit fixed...Ch. 19 - In applying the high-low method of cost estimation...Ch. 19 - If fixed costs increase, what would be the impact...Ch. 19 - Prob. 6DQ Ch. 19 - If the unit cost of direct materials is decreased,...Ch. 19 - Both Austin Company and Hill Company had the same...Ch. 19 - Prob. 9DQ Ch. 19 - Prob. 10DQ

Solution Summary: The author explains that operating leverage is a ratio that measures the proportion of fixed cost on the total costs and the extent of the changes in the sales volume affects the income from operations.

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Chapter 19 Solutions