Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units): Sales $ 50,000 Variable expenses 27,500 Contribution margin 22,500 Fixed expenses 14,850 Net operating income $ 7,650 14. Assume that the amounts of the company’s total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $14,850 and the total fixed expenses are $27,500. Under this scenario and assuming that total sales remain the same, what is the degree of operating leverage?
Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units): Sales $ 50,000 Variable expenses 27,500 Contribution margin 22,500 Fixed expenses 14,850 Net operating income $ 7,650 14. Assume that the amounts of the company’s total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $14,850 and the total fixed expenses are $27,500. Under this scenario and assuming that total sales remain the same, what is the degree of operating leverage?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):
| Sales | $ 50,000 |
|---|---|
| Variable expenses | 27,500 |
| Contribution margin | 22,500 |
| Fixed expenses | 14,850 |
| Net operating income | $ 7,650 |
14. Assume that the amounts of the company’s total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $14,850 and the total fixed expenses are $27,500. Under this scenario and assuming that total sales remain the same, what is the degree of operating leverage?
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