Eugene's Environmental Consulting Service LLP had the following operating results last month: Service revenues amounted to $25,000, variable costs were $12,000, and fixed costs were $10,000 for the month. Based on this information which of the following statements about last month is correct?
A) Contribution margin was $12,000, and operating profit was $2,000
B) Contribution margin was $13,000, and operating profit was $3,000.
C) Eugene's operated at break-even.
D) Eugene's had a degree of operating leverage of 4.0.

Question

Quizplus · Accepted Answer

Service revenues of $25,000 less variable costs of $12,000 results in a contribution margin of $13,000. Contribution margin of $13,000 minus$10,000 of fixed costs is equal to operating profit of $3,000 last month.

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