Head-First Company plans to sell 5,000 baseball bats at $75 each in the coming year. Unit contribution margin is $25. Total fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative expense). Operating income at 5,000 units sold is $75,500.
The degree of operating leverage (rounded to the nearest tenth) is
Total Contribution margin = 5,000*25 = 125,000
Net operating income = Total Contribution margin - Fixed cost
= 125,000 - 49,500 = 75,500
Degree of operating leverage = Contribution margin/Net operating income
= 125,000/75,500
= 1.66
Head-First Company plans to sell 5,000 baseball bats at $75 each in the coming year. Unit...
Head-First Company plans to sell 5,000 baseball bats at $75 each in the coming year. Unit contribution margin is $25. Total fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative expense). Operating income at 5,000 units sold is $75,500. The degree of operating leverage (rounded to the nearest tenth) is
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