Question

​Tom's Taxidermy has a monthly target operating income of $29,000. Variable expenses are 65​% of sales and monthly fixed expenses are $10,000. What is​ Tom's operating leverage factor at the target level of operating​ income

Answer 1

Answer:

Leverage factor will be 1.344

Explanation:

We have given operating income = $29000

And variable expenses is 65 5 of the sales

And fixed expenses = $10000

So contribution margin = $29000+$10000 = $39000

We have to find the leverage factor

Leverage factor is given by

Leverage factor $=\frac{contribution\ margin}{operating\ income }=\frac{39000}{29000}=1.344$

So leverage factor will be 1.344