A manufacturer of tiling grout has supplied the following data:

-The company's degree of operating leverage is closest to:
A) 9.77
B) 1.36
C) 3.53
D) 2.47

Question

A manufacturer of tiling grout has supplied the following data:
 
-The company's degree of operating leverage is closest to:
A) 9.77 
B) 1.36 
C) 3.53 
D) 2.47

Quizplus · Accepted Answer

Contribution margin = Sales - Variable expenses
= $2,736,000 - ($1,349,000 + $399,000)
= $2,736,000 - $1,748,000 = $988,000
Degree of operating leverage = Contribution margin ÷ Net operating income
= $988,000 ÷ $280,000 = 3.53

A Manufacturer of Tiling Grout Has Supplied the Following Data