If sales amounted to $375,000,variable costs are 70% of sales,and operating income is $50,000,what is the operating leverage?
A)8.125
B)12.750
C)5.688
D)2.250

Question

Quizplus · Accepted Answer

Operating leverage is calculated as Contribution Margin / Operating Income. Contribution Margin = Sales - Variable Costs = $375,000 - (0.70 * $375,000) = $112,500. Operating Leverage = $112,500 / $50,000 = 2.25.

If Sales Amounted to $375,000,variable Costs Are 70% of Sales,and