A company that makes organic fertilizer has supplied the following data: Bags produced and sold 200,000 Sales revenue $ 1,560,000 Variable manufacturing expense $ 660,000 Fixed manufacturing expense $ 448,000 Variable selling and administrative expense $ 180,000 Fixed selling and administrative expense $ 214,000 Net operating income $ 58,000 The company's degree of operating leverage is closest to:

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ammary456 ammary456 · Answer 1 · 2020-03-12T11:35:39+01:00

Answer:

The company's degree of operating leverage is closest to $840000

Explanation:

Selling price per unit = Sales revenue / No. of bags sold

= $1560000/200000 bags = $7.8 per bag

Variable cost per unit=Total variable expenses/No. of units

= $840000/200000 units = $4.2 per bag

Company’s unit contribution margin = Selling price per unit-Variable cost per unit

= $7.8 per unit-$4.2 per unit = $3.6 per unit

Company's degree of operating leverage = Variables manufacturing expense + Variable selling and administrative expense

=$660000+$180000 = $840000

Tundexi Tundexi · Answer 2 · 2022-01-04T12:54:43+01:00

The company's degree of operating leverage is closest to 12.41.

Contribution Margin = $1,560,000 - $660,000 - $180,000

Contribution Margin = $720,000

Degree of operating leverage = Contribution Margin / Net Operating Income

Degree of operating leverage = $720,000 / $58,000

Degree of operating leverage = 12.41

Hence, the company's degree of operating leverage is closest to 12.41.