Answer:
1.64
Explanation:
Heather Hudson is a manufacturer of stuffed teddy bears, the following are the current information gotten from her business
Selling price of the bear= $35
Total fixed cost per month= 1,500
Variable cost for one near= 24
The formular used to calculate the degree of operating leverage is
= Total contribution margin/ Net operating income
First of all we have to find the Total contribution margin
= (35-24)×350
= 11×350
= 3,850
Total contribution cost = 3,850
The next step is to find the Net operating income
= Contribution margin-fixed costs
= 3,850-1,500
= 2,350
Therefore the degree of operating leverage is
= 3,850/2350
= 1.64
Hence Heather Hudson degree of operating leverage if she sells 350 bears for a month is 1.64
