Light Me Up Lamps has variable expenses of 50% of sales and monthly fixed expenses of $ 200 comma 000. The monthly target opera

Question

3 years ago

13

Light Me Up Lamps has variable expenses of 50% of sales and monthly fixed expenses of $ 200 comma 000. The monthly target opera

ting income is $ 30 comma 000. What is Light Me Up Lamps' operating leverage factor at the target level of operating income?

Business

1 answer:

NARA [144] · Answer 1 · 2022-08-13T22:40:55+03:00

Answer:

Operating Leverage Factor 7.67

Explanation:

Operating leverage factor is a very important measure of a company for forecasting growth. It shows the contribution margin that is necessary to gain against one $1 of operating income.

Contribution margin Ratio = Fixed cost + Target operating Income

Contribution Margin = $200,000 - 30,000 = $230,000

Operating Leverage factor = Contribution margin / Target Operating Income

Operating Leverage factor = $230,000 / $30,000 = 7.67

Light Me Up Lamps has variable expenses of 50​% of sales and monthly fixed expenses of $ 200 comma 000. The monthly target opera

Light Me Up Lamps has variable expenses of 50% of sales and monthly fixed expenses of $ 200 comma 000. The monthly target opera