Charlestown Marina's Forecasts Indicate That If Slip Rentals Equal $500,000

question 60

Multiple Choice

Charlestown Marina's forecasts indicate that if slip rentals equal $500,000, net operating income will be $25,000 and if rentals equal $525,000, net operating income will be $37,500. What is Charletown's degree of operating leverage?

• A) 2
• B) 10
• C) .05
• D) .10

---

Definitions:

Incremental Manufacturing Cost

The additional cost incurred to produce an extra unit of output, excluding fixed costs.

Contribution Format

A method of income statement preparation that separates fixed costs from variable costs.

Traditional Format

A conventional method of presenting financial statements or information, typically focusing on separating costs into fixed and variable categories.

Variable Selling Expense

Expenses that vary with sales volume, including commissions and shipping charges.