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30 May, 13:18

LO 3.5If a firm has a contribution margin of $59,690 and a net income of $12,700 for the current month, what is their degree of operating leverage?

0.18

1.18

2.4

4.7

+5
Answers (1)
  1. 30 May, 14:57
    0
    4.7

    Explanation:

    The computation of the degree of operating leverage is presented below:

    = Contribution margin : Net income

    = $59,690 : $12,700

    = 4.7

    where,

    Contribution margin = Sales - Variable costs

    And, the net income would be

    = Sales - Variable costs - Fixed costs

    The net income is also known as earning before interest and taxes
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