Larimore Company sales are $560,000.The company has variable costs equal to 40% of sales and total fixed costs of $150,000.
Required:
1)What is the company's break-even point in sales dollars?
2)Compute the company's operating leverage at its current sales level.
3)Compute the percentage change in income that will accompany a 10% increase in sales.
4)Compute the company's net income and operating leverage (rounded to one decimal place)if sales increase by 10%.
5)Describe the effect on operating leverage as a company's sales increase and it moves further beyond its break-even point.

Question

Quizplus · Accepted Answer

The Answer of Larimore Company sales are $560,000.The company has variable costs equal to 40% of sales and total fixed costs of $150,000.
Required:
1)What is the company's break-even point in sales dollars?
2)Compute the company's operating leverage at its current sales level.
3)Compute the percentage change in income that will accompany a 10% increase in sales.
4)Compute the company's net income and operating leverage (rounded to one decimal place)if sales increase by 10%.
5)Describe the effect on operating leverage as a company's sales increase and it moves further beyond its break-even point.

Larimore Company Sales Are $560,000