Question: Johns Software is a leading software business, which mostly incurs fixed costs for upfront development and marketing. Johns fixed costs are $780,000, which goes towards

Johns Software is a leading software business, which mostly incurs fixed costs for upfront development and marketing. Johns fixed costs are $780,000, which goes towards developers salaries and the variable cost per unit is $0.08. The company sells 300,000 units for $25 each. Given that the software industry is involved in the development, marketing and sales, it includes a range of applications, from network systems and operating management tools to customized software for enterprises.

Based on the companys sales, fixed costs, and variable cost per unit, its operating leverage is :

Operating Leverage = Contribution Margin / Net Operating income

	a.	1
	b.	1.5
	c.	1.12
	d.	1.2

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