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: W Company’s operating leverage.

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Answer 1

Question

Chapter 21, Problem 21.6BPE

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: W Company’s operating leverage.

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Answer 2

Question

Chapter 21, Problem 21.6BPE

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: W Company’s operating leverage.

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 3

Question

Chapter 21, Problem 21.6BPE

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: W Company’s operating leverage.

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Answer 4

Question

Chapter 21, Problem 21.6BPE

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: W Company’s operating leverage.

Expert Solution & Answer

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Answer 5

Chapter 21, Problem 21.6BPE

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: W Company’s operating leverage.

Answer 6

Chapter 21, Problem 21.6BPE

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: W Company’s operating leverage.

Answer 7

Chapter 21, Problem 21.6BPE

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: W Company’s operating leverage.

Answer 8

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Answer 11

Ch. 21 - Describe how total variable costs and unit...Ch. 21 - How would the following costs be classified...Ch. 21 - Describe how total fixed costs and unit fixed...Ch. 21 - In applying the high-low method of cost estimation...Ch. 21 - If fixed costs Increase, what would be the impact...Ch. 21 - An examination of the accounting records of...Ch. 21 - Prob. 7DQ Ch. 21 - Both Austin Company and Hill Company had the same...Ch. 21 - How does the sales mix affect the calculation of...Ch. 21 - What does operating leverage measure, and how is...

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

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Chapter 21 Solutions