Westminster Co. reports the following data, SungSam Enterprises reports the following data

Westminster Co. reports the following data:

Sales                               $875,000
Variable costs                   425,000
Contribution margin       $450,000
Fixed costs                        150,000
Income from operations $300,000

Determine Westminster Co.’s operating leverage.

Answer:








Operating Leverage = 
Contribution Margin 
= $450,000 
=  1.5 
Income from Operations $300,000 


SungSam Enterprises reports the following data:

Sales                                $340,000
Variable costs                    180,000
Contribution margin        $160,000
Fixed costs                          80,000
Income from operations $  80,000

Determine SungSam Enterprises’s operating leverage.

Answer:







Operating Leverage = 
Contribution Margin 
= $160,000 =  2 
Income from Operations $80,000