Magazine Inc.had the following income statement for the current year:
Required:
$$\begin{array} { l r }
\text { Sales } & \$ 50,000 \
\text { Variable expenses } & 30,000 \
\text { Contribution margin } & \$ 20,000 \
\text { Fixed expenses } & 8,000 \
\text { Operating income } & \$ 12,000
\end{array}$$ A. Calculate the 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?

Question

Magazine Inc.had the following income statement for the current year:
Required:
 $$\begin{array} { l r } 
\text { Sales } & \$ 50,000 \
\text { Variable expenses } & 30,000 \
\text { Contribution margin } & \$ 20,000 \
\text { Fixed expenses } & 8,000 \
\text { Operating income } & \$ 12,000
\end{array}$$ A. Calculate the 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?

Quizplus · Accepted Answer

The Answer of Magazine Inc.had the following income statement for the current year:
Required:
 $$\begin{array} { l r } 
\text { Sales } & \$ 50,000 \
\text { Variable expenses } & 30,000 \
\text { Contribution margin } & \$ 20,000 \
\text { Fixed expenses } & 8,000 \
\text { Operating income } & \$ 12,000
\end{array}$$ A. Calculate the 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?

Magazine Inc A Calculate the Operating Leverage Ratio