If Sales Are $400,000, Variable Costs Are 80% of Sales

question 157

Multiple Choice

If sales are $400,000, variable costs are 80% of sales, and operating income is $40,000, what is the operating leverage?

• A) 0
• B) 7.500
• C) 2.0
• D) 1.333

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Definitions:

Expensive Capacity

The increased costs associated with maintaining additional or higher-capacity resources than typically required to meet average demand.

Temporary Workforce

Workers hired on a non-permanent basis to fulfill short-term staffing needs, often to address seasonal demands, special projects, or absences.

Peak Season

A rephrased definition for Peak Period; it's a time of year when demand for products or services is significantly higher than usual.

Seasonal Workforce

Temporary employment that fluctuates in response to changes in demand for products or services at different times of the year.