Answer:
Instructions are listed below.
Explanation:
Giving the following information:
The company has a ball that sells for $25.
Unitary variable cost= $15.00
Fixed expenses= 426,000
The contribution margin ratio is the contribution margin expressed as a percentage. It is the percentage of sales available to cover the fixed expense. It is calculated using the following formula:
Contribution margin ratio= (selling price - unitary variable cost)/selling price
Contribution margin ratio= (25 - 15)/25= 0.4
Break-even point (units)= fixed costs/ contribution margin
Break-even point (units)= 426,000/10= 42,600 units
The degree of operating leverage helps to determine how income changes in response to change in sales.
Degree of operating leverage= total contribution margin / (total contribution margin - fixed cost)
Degree of operating leverage= (62,000*10) / [(62,000*10) - 426,000]
Degree of operating leverage= 3.20
