Magazine Inc. had the following income statement for the current year: $$\begin{array} { l r }
\text { Sales } & \$ 50,000 \
\text { Variable costs } & 30,000 \
\text { Contribution margin } & \$ 20,000 \
\text { Fixed costs } & 8,000 \
\text { Operating income } & \$ 12,000 \
\end{array}$$ Required:
A. Calculate the degree of operating leverage ratio.
B. If sales increase by 40 percent, what will be the percentage change in income?
C. If sales decrease by 10 percent how much will income decrease as a percentage?

Question

Magazine Inc. had the following income statement for the current year: $$\begin{array} { l r } 
\text { Sales } & \$ 50,000 \
\text { Variable costs } & 30,000 \
\text { Contribution margin } & \$ 20,000 \
\text { Fixed costs } & 8,000 \
 \text { Operating income } & \$ 12,000 \
\end{array}$$ Required:
A. Calculate the degree of operating leverage ratio.
B. If sales increase by 40 percent, what will be the percentage change in income?
C. If sales decrease by 10 percent how much will income decrease as a percentage?

Quizplus · Accepted Answer

The Answer of Magazine Inc. had the following income statement for the current year: $$\begin{array} { l r } 
\text { Sales } & \$ 50,000 \
\text { Variable costs } & 30,000 \
\text { Contribution margin } & \$ 20,000 \
\text { Fixed costs } & 8,000 \
 \text { Operating income } & \$ 12,000 \
\end{array}$$ Required:
A. Calculate the degree of operating leverage ratio.
B. If sales increase by 40 percent, what will be the percentage change in income?
C. If sales decrease by 10 percent how much will income decrease as a percentage?

Magazine Inc Required: A

Magazine Inc Required:
A