(URGENT) Zainab Inc. reported sales of Rs.8,000,000 for the month and incurred variable expenses totaling Rs.5,700,000 and fixed expenses totaling Rs.1,440,000. The company has no beginning or ending inventories. A total of 80,000 units were produced and sold last month. What is the company's degree of operating leverage? [round your answer to 2 decimal places]
What would be percentage change in net income if the sales increased by 10%?
1
Degree of Operating leverage = Contribution Margin / Net Operating income
Sales | 8,000,000 |
Less : Variable Expense | (5,700,000) |
Contribution Margin | 2,300,000 |
Less : Fixed Expense | (1,440,000) |
Net Operating Income | 860,000 |
Then Degree of Leverage = 2300000 / 860000 = 2.67
The degree of leverage is 2.67. If Sales increased by 10%, there will be a 26.7% increase in changes in Net Income
10 x 2.67 = 26.74
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