Question

Question 25:
What from the following is not a formula to
calculate Operating Leverage?
Contribution / EBIT
S=VC / EBIT
Operating Profit + Fixed Cost / Operating Profit
Contribution/EBT​

Answer 1

Answer:

To calculate operating leverage, divide an entity's contribution margin by its net operating income. The contribution margin is sales minus variable expenses. The contribution margin of 70% has stayed the same, and fixed costs have not changed.

Answer 2

Answer:

The correct answer is option C

Step-by-step explanation:

Explanation for Correct answer:

The option c is not related to operating leverage but all other options are related to operating leverage

Explanation for incorrect answer:

Operating leverage is the measurement of the degree to which a firm incurs a combination of fixed cost and variable cost. Operating leverage relates to the result of the combination of fixed cost and variable cost. A company with a greater proportion of the fixed cost is said to be using more operating leverage.

Operating leverage can be calculated as:

$DOL=Sales- \frac{Variable cost}{Profit}$

$=\frac{Contribution}{EBIT}$