Eugene's Environmental Consulting Service LLP had the following operating results last month. Service revenues amounted to $50,000, variable costs were $24,000, and fixed costs were $10,000 for the month. Based on this information, which of the following statements is correct about last month's results?

Question

Quizplus · Accepted Answer

Eugene's had 160 hours of direct labor at $150 per hour, equal to total variable costs of $24,000. Service revenues of $50,000 minus variablecosts of $24,000 result in a contribution margin of $26,000. A contribution margin of $26,000 minus $10,000 of fixed costs is equal to operating profit of$16,000 last month. Degree of operating leverage is equal to contribution margin divided by operating margin, so DOL = $26,000 ÷ $16,000 = 1.625.

Eugene's Environmental Consulting Service LLP Had the Following Operating Results