Sales |
$27,500 |
Variable expenses |
16,500 |
Contribution margin |
$11,000 |
Fixed expenses |
4,400 |
Operating income |
$6,600 |
Required: |
|
a. Operating leverage ratio = Contribution margin / Operating income                                        = 11,000 / 6,600                                        = 1.67 b.   Amount ($) Sales  33,000 Less: Variable expenses 19,800 Contribution margin 13,200 Less: Fixed expenses 4,400 Operating Income 8,800 If sales increase by 20%, new sales would be = 27,500 + (27,500*20%) = 33,000 Variable expenses will also be increased by 20% = 16,500 + (16,500 * 20%) = 19,800 Fixed expenses always remains constant. Percentage change in Income = (8,800 - 6,600) / 6,600                       ... See the full answer