Question

# The degree of operating leverage can be calculated as: . Closser Corporation produces and sells two...

The degree of operating leverage can be calculated as:

.

Closser Corporation produces and sells two products. In the most recent month, Product M50S had sales of \$39,000 and variable expenses of \$12,870. Product H50G had sales of \$12,000 and variable expenses of \$4,980. The fixed expenses of the entire company were \$33,050. The break-even point for the entire company is closest to:

 \$ 33,050
 \$ 50,900
 \$ 17,950
 \$ 50,846

Contribution = Sales – Variable costs

 Calculations A B C = A + B Particulars Product M50S Product H50G Total Sales 39000 12000 51000 Variable expenses 12870 4980 17850 Contribution 26130 7020 33150

Contribution margin ratio for the entire company

= Total Contribution / Total Sales

= \$33,150 / \$51,000

= 0.65 or 65%

So, Break even point (Sales)

= Fixed costs / Contribution margin ratio

= \$33,050 / 0.65

= \$ 50,846

So, as per above calculations, option D is the correct option

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