Question

Matthew's Fish Fry has a monthly target operating income of $7,200. Variable expenses are 60% of sales and monthly fixed expensesare $1,800 What is Matthew's operating leverage factor at the target level of operating income? A) 0.75 B) 5.00 C) 1.25 D) 0.80

Answer 1

Answer:

The answer is C) 1.25

Explanation:

Operating Leverage= (operating income + fixed expenses) / operating income

Operating Leverage= ($7,200 + $1,800) / $7,200= 1.25