View History Bookmarks Tools Window Help ? https:/ .Search 6 5/10 Total poln Sub

Question

View History Bookmarks Tools Window Help ? https:/ .Search 6 5/10 Total poln Submined The following income statement is provided for Vargas, Inc Sales revenue (3,500 units x $21.00 per unit) cost of goods sold (variable: 3,500 units $11.00 per unit) (38,500) Cost of goods sold (fixed) Gross margin Administrative salaries Depreciation Supplies (3,500 units x $3.00 per unit) Net incone $ 73,500 5,000) 30,000 (7,000) (6,000) ed (10,500 6,500 What is this company's magnitude of operating leverage? Multiple Choice 377 Prov 1 of 10 Next > MacBook Pro

Explanation / Answer

Contribution margin = Sales revenue - Variable costs

= Sales revenues - Variable cost of goods sold - Variable cost of supplies

= 73,500 - 38,500 - 10,500

= 24,500

Operating leverage = Contriubution margin / operating income

= 24,500 / 6,500

= 3.77 times

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