Answer:
Operating leverage = 300 / 20 = 15.
Explanation:
A cost-accounting formula that measures the degree to which a firm or project can boost operating income by increasing revenue is referred to as Operating leverage.
A business that makes sales with a high gross margin and low variable costs has high operating leverage.
It is measured as a percent change in operating income /percentage change in sales.
Here sales have declined by 20% and operating income has declined by 300%.
Operating leverage = percentage change in operating income /percentage change in sales.
Operating leverage = 300 / 20 = 15.
The company had an operating leverage of is :
-15.
Operating leverage could be a cost-accounting equation that measures the degree to which a firm or venture can increment working pay by expanding income.
A business that makes bargains with a tall net edge and low variable costs has tall working leverage.
A business that produces deals with a tall net edge and low variable costs has tall working leverage.
Operating leverage
Learn more about "Operating Leverage":
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