Mary Smith sells gourmet chocolate chip cookies. The results of her last month of operations are as
Question:
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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Sales 50000 Variable expenses COGS 26000 Selling 1600 Administrative 7200 Total v...View the full answer
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