A company sells 45,000 units of its product at a price of $60 per unit. Variable...
A company sells 45,000 units of its product at a price of $60 per unit. Variable costs are $51 per unit and fixed costs are $275,000. What is the degree of operating leverage for the firm?
|
.32 |
||
|
,76 |
||
|
1.47 |
||
|
3.11 |
Homework Answers
Contribution margin=Sales-Variable cost
=(60-51)=$9 per unit
Total contribution margin=(9*45000)=$405,000
Less:Fixed costs=(275,000)
Net operating income=$130,000
Degree of operating leverage=Total contribution margin/Net operating income
=405,000/130,000
=3.11(Approx)
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