Question

155) Bristo Corporation has sales of 1,600 units at $50 per unit. Variable expenses are 25% of the selling price. If total fixed expenses are $50,000, the degree of operating leverage is: A) 2.00 B) 8.00 C) 2.17 D) 6.00

Answer 1

D) 6.00

Step-by-step explanation:

Particulars Amount

Sales(1600*50) $80,000

Variable expenses(80,000*25%) $20,000

Contribution margin $60,000

Fixed expenses $50,000

Net operating income $10,000

Degree of operating leverage = Contribution margin / Net operating income

Degree of operating leverage = $60,000/$10,000

Degree of operating leverage = 6