If sales are $400,000, variable costs are 75% of sales, and operating income is $40,000, what is the operating leverage? (round to one decimal place.)

If sales are $400,000, variable costs are 75% of sales, and operating income is $40,000, what is the operating leverage?

Sales = $400,000

Variable costs =.75

($400,000) (.75) = $300,000

Operating leverage = ($400,000 - $300,000) / $40,000 = 2.5

Operating leverage is 2.5