Question

The Kandy Shop has an operating income of $29,000.

a) Calculate the degree of operating leverage for each of the independent cases (assuming operating income is held constant):

i. Contribution Margin is $58,000.
ii. CM ratio is 56% and revenue is $133,000.
iii. Selling price per unit is $34, variable costs per unit are $16 and it sold 3,200 units.
Do not enter dollar signs or commas in the input boxes.
Round contribution margin and operating income to the nearest whole number. Round the degree of operating leverage to 2 decimal places.

	Contribution Margin	Operating Income	Degree of Operating Leverage
i.	$Answer	$Answer	Answer
ii.	$Answer	$Answer	Answer
iii.	$Answer	$Answer	Answer

b) Which scenario has the largest degree of operating leverage?
Scenario: Answeriiiiii

Answer 1

Do not enter dollar signs or commas in the input boxes.
Round contribution margin and operating income to the nearest whole number. Round the degree of operating leverage to 2 decimal places.

	Contribution Margin	Operating Income	Degree of Operating Leverage
i.	58000	29000	58000/29000 = 2
ii.	133000*56% = 74480	74480-29000 = 45480	74480/45480 = 1.64
iii.	18*3200 = 57600	57600-29000 = 28600	57600/28600 = 2.01

b) Which scenario has the largest degree of operating leverage?
Scenario: iii