Tom's Taxidermy has a monthly target operating income of $25,000

Accounting Feb 24, 2021

Tom's Taxidermy has a monthly target operating income of $25,000. Variable expenses are 75% of sales and monthly fixed expenses are $15,000. What is Tom's operating leverage factor at the target level of operating income?

A) 0.40

B) 0.63

C) 1.60

D) 2.67

Expert Solution

Answer: C

Explanation: C)

Target income 25,000

+ Fixed expense 15,000

40,000

Divided by target Inc. 25,000

Operating leverage = 1.60

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