Question

​Tom's Taxidermy has a monthly target operating income of $29,000. Variable expenses are 65​% of sales and monthly fixed expenses are $10,000. What is​ Tom's operating leverage factor at the target level of operating​ income

Answer 1

Leverage factor will be 1.344

Step-by-step explanation:

We have given operating income = $29000

And variable expenses is 65 5 of the sales

And fixed expenses = $10000

So contribution margin = $29000+$10000 = $39000

We have to find the leverage factor

Leverage factor is given by

Leverage factor
`=(contribution\ margin)/(operating\ income )=(39000)/(29000)=1.344`

So leverage factor will be 1.344