Degree of operating leverage
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The income statement for Ellwell is as follows:
Sales (10,000 units) $80,000
Less variable costs -$48,000
Contribution margin $32,000
Less fixed costs -$24,000
Net income $8,000
If sales increase by 1,000 units, profits will:
increase by $800.
increase by $3,200.
increase by $4,800.
increase by $8,000
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Solution Summary
Calculates degree of operating leverage to determine the change in profits when sales increase.
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Sales (10,000 units) $80,000
Less variable costs -$48,000
Contribution margin $32,000
Less fixed costs -$24,000
Net income ...
Purchase this Solution
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