Homework Answers
Correct answer---------Bottled water
.
Bottled water has the highest operating leverage.
| Soft Drinks | Bottled Water | Fruit Juices | |
| Sales | $ 50,000 | $ 50,000 | $ 50,000 |
| Less: Variable costs | $ 10,000 | $ 5,000 | $ 30,000 |
| Contribution margin | $ 40,000 | $ 45,000 | $ 20,000 |
| Fixed cost | $ 30,000 | 40000 | $ 10,000 |
| Net operating income | $ 10,000 | $ 5,000 | $ 10,000 |
| Degree of operating leverage = Contribution margin /Net operating income | |||
| Operating leverage | 4.00 | 9.00 | 2.00 |
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