If the contribution margin ratio is 0.45, targeted operating income is $95,000, and targeted sales volume...

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If the contribution margin ratio is 0.45, targeted operating income is $95,000, and targeted sales volume...

If the contribution margin ratio is 0.45, targeted operating income is $95,000, and targeted sales volume in dollars is $550,000, then the degree of operating leverage is ________. A. 2.61 times B. 3.18 times C. 1.22 times D. 0.38 times

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Answer 1

Answer #1

Degree of operating leverage = % change in operating income with respect to change in sales

It can also be calculated as

Contribution/operating income

Contribution = Sale* contribution margin ratio

= $550000*.45

=$247500

Degree of operating leverage = $247500/$95000=2.61 times

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Answer 2

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