Question

Serfass Corporation's contribution format income statement for July appears below: Sales $353,800 Variable expenses 194,590 Contribution margin 159, 210 Fixed expenses 65,280 Net operating income $93,930 The degree of operating leverage is closest to: The degree of operating leverage is closest to:a. 0.27 b. 0.59 c. 2.22 d. 1.6

Answer 1

The correct answer is option (d).

Step-by-step explanation:

According to the scenario, the Computation of the given data are as follows:

We can calculate the degree of operating leverage by using following formula:

Degree of operating leverage = Contribution margin ÷ Operating income

Where, Contribution Margin = 159,210

Operating income = $93,930

So, by putting the value we get,

Degree of operating leverage = 159,210 ÷ 93,930

= 1.69