Question
(2 points) Bruins Company incurs variable costs of 30% of sales and fixed costs of $315,000. If the company's margin of safety is $115,000, what
(2 points) Bruins Company incurs variable costs of 30% of sales and fixed costs of
$315,000. If the company's margin of safety is $115,000, what is the company's
operating leverage? (Round your answer to two decimal places)
a. 2.74
b. 0.37
c. 4.91
d. 2.26
e. 10.13
f. 2.91
g. 3.74
h. None of the above.
This is what I have done..Please tell me where I messed up
x=sales
variable costs= 0.3x
FC=315,000
x - .3x - 315,000 = 115,000
x - 0.3x =430,000
x = 1,433,333.33(sales)
Plus that in the equation above for x and get contribution margin of 1,003,333. then solve for operating Leverage 1,003,333(CM) / 688,333(Operating Income)
I know its wrong. But this is how I approached the problem.
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