If Sales Are $500,000, Variable Costs Are 75% of Sales

question 197

Multiple Choice

If sales are $500,000, variable costs are 75% of sales, and operating income is $40,000, what is the operating leverage?

• A) 0
• B) 1.25
• C) 1.3
• D) 3.1

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Definitions:

Monthly Basis

Refers to events, measurements, or calculations that occur or are determined every month.

Ledger Account

A record that summarizes all the transactions related to a particular item or individual in the accounting system, facilitating the preparation of financial statements.

Service Revenue

Revenue generated from the provision of services to customers.

Accounts Receivable

Accounts Receivable refers to the money owed to a company by its customers for products or services delivered or used but not yet paid for.