Question

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)​

Answer 1

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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