Based on the above data,which company has a higher operating leverage?
A) Gable,Inc.
B) Harlowe,Inc.
C) Operating leverage is the same for both companies
D) Cannot be determined

Question

Quizplus · Accepted Answer

Magnitude of operating leverage = Contribution margin ÷ Net income
Gable: Magnitude of operating leverage = $400,000 ÷ $200,000 = 2.0
Harlowe: Magnitude of operating leverage = $600,000 ÷ $200,000 = 3.0

Based on the Above Data,which Company Has a Higher Operating