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Aklil Tessema _ Student - WakeHlthSciEC
on Dec 17, 2024

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Goodman Corporation has sales volumes of 3,000 units at $80 per unit. Variable costs are 35% of the sales price. If total fixed costs are $66,000, the degree of operating leverage is:

A) 0.79
B) 0.93
C) 2.67
D) 1.73

Degree Of Operating Leverage

A measure, at a given level of sales, of how a percentage change in sales volume will affect profits. The degree of operating leverage is computed by dividing contribution margin by net operating income.

Variable Costs

Costs that change in proportion to the level of activity or volume of output produced.

Fixed Costs

Overheads that are unaffected by the quantity of output or sales, for example, tenancy costs, wages for staff, and indemnity expenses.

  • Calculate and interpret the degree of operating leverage.
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Ghassan AlqurashiDec 22, 2024
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