Use the information below to answer the following questions.
Unique Tables manufacture coffee tables made of recycled timber. Market research has suggested that there will be strong demand for the tables. Due to this, management is debating whether to lease a new turning machine to meet increased production. To assist in their decisionmaking, the management accountant has supplied the following information: $\begin{array}{lll}&\text { Without }&\text {With }\&\text { turning machine }&\text { turning machine }\\hline
\text { Expected level of sales } & 1,500 \text { units } & 1,500 \text { units } \
\text { Sales price per unit } & \$ 150 & \$ 150 \
\text { Variable costs per unit } & \$ 120 & \$ 110 \
\text { Fixed costs } & \$ 7500 & \$ 15,000
\end{array}$
-Refer to the table above. The operating gearing for Unique Tables is:

Question

Quizplus · Accepted Answer

Operating gearing is a measure of the proportion of fixed costs in a company's cost structure. A higher operating gearing means that a company has a higher proportion of fixed costs relative to variable costs. In the scenario provided, with the turning machine, the fixed costs increase from $7,500 to $15,000, while variable costs per unit decrease. This means that the proportion of fixed costs in the cost structure is higher with the turning machine, leading to higher operating gearing.

Use the Information Below to Answer the Following Questions -Refer to the Table Above