tom company reports the following data:

sales: $600,000
variable costs: 400,000
fixed costs: 100,000

determine tom companys operating leverage. round your answer to one decimal place.

Question

tom company reports the following data:

sales: $600,000
variable costs: 400,000
fixed costs: 100,000

determine tom companys operating leverage. round your answer to one decimal place.

Accepted Answer

{ "quality": "clear", "question_count": 1, "skills_matched": [ "step_cot", "blank_filling_formatter", "explain_then_answer", "tutor", "mastery_adaptive_brevity" ], "needs_drawing": false, "concepts_used": [ "Variable Cost", "Fixed Cost", "Operating Income", "Degree of Operating Leverage" ], "new_concepts": [], "current_concepts": [ "Variable Cost", "Fixed Cost", "Operating Income", "Degree of Operating Leverage" ] } ## Calculate contribution margin Using the *Variable Cost* knowledge point $$ \begin{aligned} \text{Contribution Margin} &= \text{Sales} - \text{Variable Costs} \ &= \$600,000 - \$400,000 \ &= \$200,000 \end{aligned} $$ ## Calculate operating income Using the *Fixed Cost* and *Operating Income* knowledge points $$ \begin{aligned} \text{Operating Income} &= \text{Contribution Margin} - \text{Fixed Costs} \ &= \$200,000 - \$100,000 \ &= \$100,000 \end{aligned} $$ ## Calculate degree of operating leverage Using the *Degree of Operating Leverage* knowledge point $$ \begin{aligned} \text{Operating Leverage} &= \frac{\text{Contribution Margin}}{\text{Operating Income}} \ &= \frac{\$200,000}{\$100,000} \ &= 2.0 \end{aligned} $$ Determine Jinn Company's operating leverage. Round your answer to one decimal place. 2.0 { "subject": "Business", "question_type": "Fill-in-the-blank", "knowledge_point": [ "Business", "Accounting", "Degree of Operating Leverage" ] }

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Explanation:

Calculate contribution margin

Calculate operating income

Calculate degree of operating leverage

Answer: