If fixed costs for Watts Corporation for the current year total $800,000, widgets are sold at $25 per unit, total variable costs are $1,200,000, how much is operating leverage?

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Operating leverage is calculated as (Contribution Margin / Net Income). Contribution Margin is calculated as (Sales - Variable Costs) / Sales. Net Income is calculated as (Sales - Variable Costs - Fixed Costs).Sales = Units Sold * Price per Unit = 1,200,000 / 25 = 48,000 unitsContribution Margin = (Sales - Variable Costs) / Sales = (48,000 * 25 - 1,200,000) / (48,000 * 25) = 0.5Net Income = (Sales - Variable Costs - Fixed Costs) = (48,000 * 25 - 1,200,000 - 800,000) = 400,000Operating Leverage = (Contribution Margin / Net Income) = 0.5 / 400,000 = 40.0%

If Fixed Costs for Watts Corporation for the Current Year