If sales amounted to $300,000, variable costs are 60% of sales, and operating income is $40,000, what is the operating leverage?

Question

Quizplus · Accepted Answer

Operating leverage is calculated as Contribution Margin / Operating Income. Contribution Margin is Sales minus Variable Costs. Here, Contribution Margin = $300,000 - (60% of $300,000) = $120,000. Operating Leverage = $120,000 / $40,000 = 3.000.

If Sales Amounted to $300,000, Variable Costs Are 60% of Sales