Question

Serfass Corporation's contribution format income statement for July appears below: Sales $ 334,800 Variable expenses 184,140 Contribution margin 150,660 Fixed expenses 72,320 Net operating income $ 78,340 The degree of operating leverage is closest to:

Answer 1

The correct answer is 1.92.

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 ÷ Net operating income

Where, Contribution Margin = $150.660

Net operating income = $78,340

By putting the value, we get

Degree of operating leverage = $150.660 ÷ $78,340

= 1.92