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carver packing company reports total contribution margin of $92,000 and income of $23,000 for the current month. in the next month, the company expects sales volume to increase by 5%. the degree of operating leverage and the expected percent change in income, respectively, are:

Respuesta :

The degree of operating leverage and expected percent change in income are 4% and 20% respectively.

Given Information:

Contribution margin = $92,000

Income = $ 23,000

Degree of operating leverage = Contribution margin / income

Degree of operating leverage = $92,000 / $23,000

Degree of operating leverage = 4

It means if sales (or contribution margin) increase by 1%, income increases by 3.2 %.

Thus, expected percentage change in income = Increase in sales * degree of operating leverage

Expected % change in income = 0.05 * 4 = 0.2 = 20%

A costing system called operating leverage determines the amount that a company or project can raise operating profit by raising revenue. A company having significant operating leverage creates revenues with a strong net income and low variable expenses.

Learn more about operating leverage here:

https://brainly.com/question/12942836

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