Compute the OperatingLeverages from the given data:Sales 50,000 units at Rs. 12 per unit.Variable cost @ Rs. 8 per unitFixed Cost Rs. 90,000 (incl 10% interest on Rs. 2,50,000)
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Answer:
We know that,
operating leverage= contribution/EBIT
Contribution= Sales- variable cost
= 6,00,000(50,000*12)-4,00,000(50,000*8)
= 2,00,000
EBIT= Contribution - fixed cost
=2,00,000-65,000 (90,000-25,000)
= 1,35,000
Operating leverage= 2,00,000/1,35,000
= 1.48
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