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27 March, 18:25

Carver Packing Company reports total contribution margin of $72,000 and pretax net income of $24,000 for the current month. In the next month, the company expects sales volume to increase by 8%. The degree of operating leverage and the expected percent change in income, respectively, are:

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  1. 27 March, 18:35
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    Degree of operating leverage = 3

    Percent change in income = 24%

    Explanation:

    Data provided in the question:

    Total contribution margin = $72,000

    Pretax net income = $24,000

    Expected increase in sales volume = 8%

    Now,

    Degree of operating leverage = contribution margin : Net operating income

    = $72,000 : $24,000

    = 3

    Percent change in income

    = Percent increase in sales * Degree of operating leverage

    = 8% * 3

    = 24%
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