Question

Mary Smith sells gourmet chocolate chip cookies. The results of her last month of operations are as follows:
Sales revenue.......... $50,000
Cost of goods sold (all variable)... 26,000
Gross margin........... 24,000
Selling expenses (20% variable)... 8,000
Administrative expenses (60% variable).. 12,000
Operating income......... $ 4,000

Required
a. What is Mary’s degree of operating leverage?
b. If Mary can increase sales by 10%, by how much will her operating income increase?



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  • CreatedFebruary 21, 2014
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