Bendel Incorporated has an operating leverage of 5.9. If the company's sales increase by 10%, its net operating income should increase by about:
A) 59.0%
B) 1.7%
C) 10.0%
D) 47.4%

Question

Quizplus · Accepted Answer

Operating leverage is a measure of how revenue growth translates into growth in operating income. It is calculated as the percentage change in operating income divided by the percentage change in sales. Therefore, with an operating leverage of 5.9, a 10% increase in sales would result in a 59% (5.9 * 10%) increase in net operating income.

Bendel Incorporated Has an Operating Leverage of 5