Answer:
Follow the instructions provided below.
Explanation:
Given the data:
The selling price of the company's ball is $25.
Variable cost per item= $15.00
Fixed costs= 426,000
The contribution margin ratio is the percentage of sales contributing to fixed costs. It is calculated using:
Contribution margin ratio= (selling price - unit variable cost)/selling price
Contribution margin ratio= (25 - 15)/25= 0.4
Break-even units= fixed costs/ contribution margin
Break-even units= 426,000/10= 42,600 units
The degree of operating leverage quantifies the change in income relative to sales fluctuations.
Degree of operating leverage= total contribution margin / (total contribution margin - fixed expenses)
Degree of operating leverage= (62,000*10) / [(62,000*10) - 426,000]
Degree of operating leverage= 3.20
