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Elina [12.6K]
3 years ago
15

Carver Packing Company reports total contribution margin of $72,000 and pretax net income of $24,000 for the current month. In t

he next month, the company expects sales volume to increase by 8%. The degree of operating leverage and the expected percent change in income, respectively, are:
A. 4.0 and 32%

B. 0.33 and 8%

C. 0.33 and 2.7%

D. 3.0 and 8%

E. 3.0 and 24%
Business
1 answer:
vlada-n [284]3 years ago
7 0

Answer:

The degree of operating leverage and the expected percent change in income, respectively, are 3.0 and 24%. The right answer is E.

Explanation:

In order to calculate the degree of operating leverage we would have to use the following formula:

opearting leverage=<u>contribution margin</u>

                                  operating income

operating leverage=<u>$72,000</u>

                                  $24,000

operating leverage=3.0

In order to calculate the degree of expected percent change in income we would have to use the following formula:

percent change in income=percent change in sales×operating leverage

percent change in income=8%×3

percent change in income=24%

The degree of operating leverage and the expected percent change in income, respectively, are 3.0 and 24%

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