Question

Light Me Up Lamps has variable expenses of 40​% of sales and monthly fixed expenses of . The monthly target operating income is . What is Light Me Up​ Lamps' operating leverage factor at the target level of operating​ income?

Answer 1

Answer: B. 3.25

Step-by-step explanation:

Operating Leverage enables a company know how much their income will increase by if they manage to increase their revenue.

The formula is;

= Contribution Margin / Net Income

`(Fixed Costs + Net Income)/( Net Income) \\= (80,000 + 180,000)/(80,000) \\= 3.25`

= 3.25