A manufacturer of premium wire strippers has supplied the following data:

-The company's degree of operating leverage is closest to:
A) 55.68
B) 3.65
C) 7.73
D) 12.76

Question

A manufacturer of premium wire strippers has supplied the following data:
 
-The company's degree of operating leverage is closest to:
A) 55.68 
B) 3.65 
C) 7.73 
D) 12.76

Quizplus · Accepted Answer

Contribution margin = Sales - Variable expenses
= $4,176,000 - ($2,871,000 + $348,000)
= $4,176,000 - $3,219,000 = $957,000
Degree of operating leverage = Contribution margin ÷ Net operating income
= $957,000 ÷ $75,000 = 12.76

A Manufacturer of Premium Wire Strippers Has Supplied the Following