Frontleg Chocolate Company manufactures and sells a premium chocolate called PremiumChoco. The following
data are available for preparing budgets for PremiumChoco for June through August of 2020.
1. Sales: June , 30,000 pounds; July, 56,000 pounds, August 58,000 pounds.
2. Direct materials: each pound of PremiumChoco requires 5 pounds of cacao seeds at a cost of $2.95 per
pound and 4 pounds of cane sugar at $.50 per pound.
3. Desired inventory levels:
	Type of Inventory	May 1	June 1	July 1	August 1
	PremiumChoco (pounds)	7,000	8,000	15,000	18,000
	cacao seeds (pounds)	6,000	9,000	10,000	13,000
	cane sugar (pounds)	5,000	14,000	20,000	25,000
4. Direct labor: direct labor time is 30 minutes per pound at an hourly rate of $20 per hour.
5. Selling and administrative expenses are expected to be .05 cents per unit sold plus $82,000 per month.
6. Your assistant has prepared two budgets: (1) The manufacturing overhead budget shows expected
costs to be 150% of direct labor cost (all variable costs).
7. The company uses a 30% markup percentage on total cost
8. Interest Expense is $150,000.
9. Income taxes are expected to be 21% of income before income taxes.

10a) Compute the operating leverage. The image is not cropped, I copied it exactly as it is.

10a	Operating leverage
	Sales revenue
	Variable expenses
	Contribution margin
	Operating leverage =