Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):   Sales $ 50,000 Variable expenses 27,500 Contribution margin 22,500 Fixed expenses 14,850 Net operating income $ 7,650   14. Assume that the amounts of the company’s total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $14,850 and the total fixed expenses are $27,500. Under this scenario and assuming that total sales remain the same, what is the degree of operating leverage?

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):

 

Sales $ 50,000
Variable expenses 27,500
Contribution margin 22,500
Fixed expenses 14,850
Net operating income $ 7,650

 

14. Assume that the amounts of the company’s total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $14,850 and the total fixed expenses are $27,500. Under this scenario and assuming that total sales remain the same, what is the degree of operating leverage?

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Introduction:

Operating leverage is a cost-accounting formula which calculates how much revenue can increase a company's or project's operating income. High operating leverage businesses have high gross margins as well as low variable costs.

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