The following income statement is provided for Vargas, Inc. What is this company's magnitude of operating leverage? Assume that net income is equal to operating income. Sales revenue (2,500 units x S60 per unit)Cost of goods sold (varable; 2,500 units x $20 per unit)Cost of goods sold (fixed)Gross marginAdministrativesalariesDepreciationSupplies (2,500 units x $4 per unit)Net incomeSS150,000(50,000)(8,000)92,000(42,000)(10,000)(10,000)30,000

FORMULA Magnitude of Operating leverage= Contribution ÷Net income Where Contribution = sales-…

Answered: What is this company's magnitude of…

Business

Accounting

What is this company's magnitude of operating leverage?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter5: The Income Statement And The Statement Of Cash Flows

Section: Chapter Questions

Problem 1RE: Brandt Corporation had sales revenue of 500,000 for the current year. For the year, its cost of...

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Question

The following income statement is provided for Vargas, Inc.

What is this company's magnitude of operating leverage? Assume that net income is equal to operating income.

Sales revenue (2,500 units x S60 per unit)
Cost of goods sold (varable; 2,500 units x $20 per unit)
Cost of goods sold (fixed)
Gross margin
Administrative
salaries
Depreciation
Supplies (2,500 units x $4 per unit)
Net income
S
S
150,000
(50,000)
(8,000)
92,000
(42,000)
(10,000)
(10,000)
30,000

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