SungSam Enterprises reports the following data: Sales $340,000 Variable costs 180,000 Contribution margin $160,000 Fixed costs 8

Question

djyliett [7]

3 years ago

5

SungSam Enterprises reports the following data: Sales $340,000 Variable costs 180,000 Contribution margin $160,000 Fixed costs 8

0,000 Income from operations $ 80,000 Determine SungSam Enterprises's operating leverage.

Business

1 answer:

grandymaker [24] · Answer 1 · 2022-04-24T02:11:45+03:00

Answer:

SungSam Enterprises's operating leverage is 2.0

Explanation:

Operating leverage is a financial efficiency ratio to measure the degree to which a firm or project can increase operating income by increasing revenue.

Operating leverage is calculated by using following formula:

Operating leverage = Contribution margin/Net income

SungSam Enterprises has Contribution margin of $160,000 and Income from operations of $80,000

SungSam Enterprises's operating leverage = $160,000/$80,000 = 2.0