Ask Question
28 August, 15:19

Based on the income statements of the three following retail businesses, which company has the highest operating leverage? Alpha Company - Revenue $200,000 - Variable costs ($95,000) - Contribution margin $105,000-Fixed costs ($80,000) - Net income $25,000Beta Company-Revenue $200,000-Variable costs ($155,000) - Contribution margin $45,000-Fixed costs ($20,000) - Net income $25,000Gamma Company-Revenue $200,000-Variable costs ($125,000) - Contribution margin $75,000-Fixed costs ($50,000) - Net income $25,000

+3
Answers (1)
  1. 28 August, 16:56
    0
    The Alpha company has higher operating leverage than the beta company and the gamma company.

    Explanation:

    The formula to compute the operating leverage is shown below:

    Operating leverage = Contribution : Net income

    For Alpha company,

    The operating leverage equals to

    = $105,000 : $25,000

    = 4.2

    For Beta company,

    The operating leverage equals to

    = $45,000 : $25,000

    = 1.8

    For Gamma company,

    The operating leverage equals to

    = $75,000 : $25,000

    = 3

    Among these three companies, the Alpha company has higher operating leverage than the beta company and the gamma company
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Based on the income statements of the three following retail businesses, which company has the highest operating leverage? Alpha Company - ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers