Sales at East Corporation declined from $100,000 to $80,000, while net operating income declined by 300%.Given these data, the company must have had an operating leverage of:

A) 15
B) 2.7
C) 30
D) 12

Question

Sales at East Corporation declined from $100,000 to $80,000, while net operating income declined by 300%.Given these data, the company must have had an operating leverage of:A) 15B) 2.7C) 30D) 12

Mausam Jariwala · Accepted Answer

Final Answer : A, Explanation :  Percentage change in sales = ($80,000 - $100,000)÷ $100,000 = -20%Percentage change in net operating income = Degree of operating leverage × Percentage change in sales-300% = Degree of operating leverage × -20%Degree of operating leverage = 15

Sales at East Corporation declined from $100,000 to $80,000, while net operating income declined by 300%.Given these data, the company must have had an operating leverage of:

A) 15
B) 2.7
C) 30
D) 12

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