Mercantile corporation has sales of $2,000,000, variable costs of $1,100,000, and fixed costs of $750,000. mercantile’s degree o

Question

Rama09 [41]

3 years ago

14

Mercantile corporation has sales of $2,000,000, variable costs of $1,100,000, and fixed costs of $750,000. mercantile’s degree o

f operating leverage is

Business

1 answer:

sashaice [31] · Answer 1 · 2022-02-14T22:00:48+03:00

The degree of operatingleverage is calculated by the formular
(sales - variable cost) / (sales - fixed cost - variable cost).
In the given question,
sales = $2,000,000
variable cost = $1,100,000
fixed cost = $750,000

The degree of operating leverage is (2,000,000 - 1,100,000) / (2,000,000 - 750,000 - 1,100,000) = 900,000 / 150,000 = 6.

Therefore, the degree of operating leverage is 6.