Compute the Degree of Operating Leverage at 20,000 units , for the company below:Wolfgang's Steak HouseIncome Statement for Year Ended December 31, 2016Sales (20,000 units @ $50 each)Less: Variable costs (20,000 units @ $20 each)Less Fixed Costs$1,000,000400,000200,000Earnings before interest & taxes( EBIT)$400,000Interest expense75,000Earnings before taxes$325,000Income tax expense (30%).97,500Earnings after taxes$227,500OA. A. 2.0ОВ. В. 0.5Ос.С. 1.5OD. D. Can not be computed at the level of production

Operating leverage is the ratio of the contribution to earnings before interest and tax.

Compute the Degree of Operating Leverage at 20,000 units , for the company below: Wolfgang's Steak House Income Statement for Year Ended December 31, 2016 Sales (20,000 units @ $50 each) Less: Variable costs (20,000 units @ $20 each) Less Fixed Costs Earnings before interest & taxes( EBIT) Interest expense $1,000,000 400,000 200,000 $400,000 75,000 Farnings before taxes $325 000

Compute the Degree of Operating Leverage at 20,000 units , for the company below: Wolfgang's Steak House Income Statement for Year Ended December 31, 2016 Sales (20,000 units @ $50 each) Less: Variable costs (20,000 units @ $20 each) Less Fixed Costs Earnings before interest & taxes( EBIT) Interest expense $1,000,000 400,000 200,000 $400,000 75,000 Farnings before taxes $325 000

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter11: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 11.2.3P

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