Use the information below to answer the following questions.
Unique Tables manufactures coffee tables made of recycled timber. Market research has suggested that there will be strong demand for the tables. Due to this, management is debating whether to lease a new turning machine to meet increased production needs. To assist in their decision-making, the management accountant has supplied the following information:
-Refer to the table above. The operating gearing for Unique Tables is:

Question

Use the information below to answer the following questions.
Unique Tables manufactures coffee tables made of recycled timber. Market research has suggested that there will be strong demand for the tables. Due to this, management is debating whether to lease a new turning machine to meet increased production needs. To assist in their decision-making, the management accountant has supplied the following information: 
-Refer to the table above. The operating gearing for Unique Tables is:

Quizplus · Accepted Answer

The operating gearing is calculated as fixed costs divided by total costs. With the addition of the turning machine, the fixed costs increase from $84,000 to $144,000 while total costs increase from $252,000 to $312,000. Therefore, the operating gearing is higher with the turning machine.

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