Question

​J&A Corporation has a monthly target operating income of $ 45 comma 900. Variable expenses are 10​% of sales and monthly fixed expenses are $ 17 comma 100. What is​ J&A's operating leverage factor at the target level of operating​ income?

Answer 1

1.37

Step-by-step explanation:

Given that

Operating income = $45,900

Variable expenses = 10%

Fixed expenses = $17,100

The calculation of operating​ income is shown below:-

Contribution margin = Operating income + Fixed expenses

= $45,900 + $17,100

= $63,000

So, Operating leverage = Contribution margin ÷ Operating income

= $63,000 ÷ $45,900

= 1.37