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Question 13 1.5 If the contribution margin ratio is 0.40, targeted operating income is 595,000, and targeted sales volume in
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Answer #1

Degree of operating leverage =

Contribution margin / Operating income

Contribution margin = Sales x Contribution margin ratio

= $520000 x 0.4 = $208000

Operating income = $95000

Degree of operating leverage =

$208000/$95000 = 2.189 times i.e. 2.19 times

Correct Answer is 2.19 times

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