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:

Consumer Surplus

The difference between what consumers are willing to pay for a good or service relative to its market price, indicating the economic benefit to consumers.

High Price

Refers to goods or services being sold at a rate above the average market value, often due to high demand, low supply, or premium quality.

Marginal Utility

Marginal utility represents the additional satisfaction or benefit a consumer gains from consuming one more unit of a good or service.

Total Utility

The overall satisfaction or value a consumer derives from consuming a certain quantity of goods or services.