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Gemiola
2 months ago
10

Goodman Corporation has sales volumes of 3,000 units at $80 per unit. Variable costs are 35% of the sales price. If total fixed

costs are $66,000, the degree of operating leverage is:
Business
1 answer:
Mariulka [3.8K]2 months ago
4 0
To calculate the degree of operating leverage, we start with the operating income: Sales totaled $240,000 (3000 units at $80 each), with variable costs at $84,000 (35% of sales). This leaves a contribution margin of $156,000, while fixed costs were $66,000, resulting in an operating income of $90,000. The degree of operating leverage is found using the formula: Contribution margin ÷ Operating income = $156,000 ÷ $90,000 = 1.73.
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