PE 21-6A Operating leverage

SungSam Enterprises reports the following data:

Sales                                $340,000
Variable costs                    180,000
Contribution margin        $160,000
Fixed costs                          80,000
Income from operations $  80,000

Determine SungSam Enterprises’s operating leverage.

Answer:


Operating Leverage = 
Contribution Margin 
= $160,000 =  2 
Income from Operations $80,000