Based on the following operating data, the operating leverage is: $$\begin{array} { | l | r | }
\hline \text { Sales } & \$ \quad 500,000 \
\hline \text { Variable costs } & 280,000 \
\hline \text { Contribution margin } & 220,000 \
\hline \text { Fired costs } & 180,000 \
\hline \text { Income from operations } & \$ 40,000 \
\hline
\end{array}$$
A)0.18
B)5.50
C)1.22
D)12.5

Question

Based on the following operating data, the operating leverage is: $$\begin{array} { | l | r | } 
\hline \text { Sales } & \$ \quad 500,000 \
\hline \text { Variable costs } & 280,000 \
\hline \text { Contribution margin } & 220,000 \
\hline \text { Fired costs } & 180,000 \
\hline \text { Income from operations } & \$ 40,000 \
\hline
\end{array}$$
A)0.18
B)5.50
C)1.22
D)12.5

Quizplus · Accepted Answer

Operating leverage is calculated as Contribution Margin / Income from Operations, which is 220,000 / 40,000 = 5.50.

Based on the Following Operating Data, the Operating Leverage Is