Question

Bristo Corporation has sales of 1,750 units at $40 per unit. Variable expenses are 30% of the selling price. If total fixed expenses are $39,000, the degree of operating leverage is:

Answer 1

1,750=$40=1,750×40=70-30÷100×39,000=58,3

Step-by-step explanation:

is total cost of production can be fixed cost +variable cost

Answer 2

degree of operating leverage= 4.9

Step-by-step explanation:

To calculate the degree of operating leverage, we need to use the following formula:

degree of operating leverage= Total contribution margin / operating income

Total Contribution margin= 1,750*(40*0.7)= $49,000

Operating income= 49,000 - 39,000= $10,000

degree of operating leverage= 49,000/10,000

degree of operating leverage= 4.9