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natta225 [31]
2 years ago
6

Bristo Corporation has sales of 1,000 units at $60 per unit. Variable expenses are 40% of the selling price. If total fixed expe

nses are $26,000, the degree of operating leverage is: Multiple Choice 2.40 6.00 2.57 3.60
Business
1 answer:
Misha Larkins [42]2 years ago
8 0

Answer:

3.60

Explanation:

Given that,

Sales units = 1,000

Sales price per unit = $60

Variable expenses = 40% of the selling price

Total Fixed cost = $26,000

Contribution margin per unit:

= Selling price - Variable cost

= $60 - ($60 × 40%)

= $60 - $24

= $36

Total contribution:

= Contribution margin per unit × Sales units

= $36 × 1,000

= $36,000

Profit = Total contribution - Fixed cost

         = $36,000 - $26,000

         = $10,000

Degree of operating leverage:

= (Sales - Variable costs) ÷ (Sales - Variable costs - Fixed Expenses)

= (60,000 - 24,000) ÷ (60,000 - 24,000 - 26,000)

= 36,000 ÷ 10,000

= 3.60  

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Answer: 2016= $13,000; 2017= $25,000

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for 2016

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= 14,000 x 1/2= $7,000

Income to be recognised in 2016  for 24 months term= Total proceeds x  period of service provided (july -december )/ Total contract term

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for 2017

Income to be recognised in 2017 for 12 months contract term=  Total proceeds x   remaining period of service provided from jan. to june 2017 / Total contract term

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