Kendall Company has sales of 1,000 units at $60 a unit.Variable expenses are 30% of the selling price.If total fixed expenses are $30,000,the degree of operating leverage is:

Question

Quizplus · Accepted Answer

First, we need to calculate the total contribution margin, which is the sales revenue minus variable expenses.

Sales revenue = 1,000 units x $60/unit = $60,000 
Variable expenses = 30% x $60,000 = $18,000

Contribution margin = $60,000 - $18,000 = $42,000

Next, we can calculate the operating income using the contribution margin and fixed expenses.

Operating income = Contribution margin - Fixed expenses 
Operating income = $42,000 - $30,000 = $12,000

Now, we can calculate the degree of operating leverage by dividing the contribution margin by the operating income.

Degree of operating leverage = Contribution margin / Operating income 
Degree of operating leverage = $42,000 / $12,000 
Degree of operating leverage = 3.50

Therefore, the best choice is D, with a degree of operating leverage of 3.50.

Kendall Company Has Sales of 1,000 Units at $60 a Unit.Variable