Operating leverage is often measured as the percentage increase in pretax profits after depreciation for a 1% increase in sales.
a. Calculate the operating leverage for the electric scooter project assuming unit sales are 100,000 (see Section 10-2).
b. Now show that this figure is equal to 1 + (fixed costs including depreciation divided by pretax profits).
c. Would operating leverage be higher or lower if sales were 200,000 scooters?
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