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4 December, 13:04

Heather Hudson makes stuffed teddy bears. Recent information for her business follows: Selling price per bear$35.00 Total fixed cost per month 1,500.00 Variable cost per bear 24.00 Determine the degree of operating leverage if she sells 350 bears this month. (Round your answer to 2 decimal places.) 35.00

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Answers (2)
  1. 4 December, 14:58
    0
    1.64

    Explanation:

    Heather Hudson is a manufacturer of stuffed teddy bears, the following are the current information gotten from her business

    Selling price of the bear = $35

    Total fixed cost per month = 1,500

    Variable cost for one near = 24

    The formular used to calculate the degree of operating leverage is

    = Total contribution margin / Net operating income

    First of all we have to find the Total contribution margin

    = (35-24) * 350

    = 11*350

    = 3,850

    Total contribution cost = 3,850

    The next step is to find the Net operating income

    = Contribution margin-fixed costs

    = 3,850-1,500

    = 2,350

    Therefore the degree of operating leverage is

    = 3,850/2350

    = 1.64

    Hence Heather Hudson degree of operating leverage if she sells 350 bears for a month is 1.64
  2. 4 December, 16:12
    0
    1.64

    Explanation:

    Heather Hudson degree of operating leverage

    Formula for degree of operating leverage will be:

    Degree of Operating Leverage = Total Contribution Margin / Net Operating Income

    Total CM = (35-24) * 350

    = 3,850

    Formula for Net operating income

    Net Operating income = Contribution Margin - Fixed Costs

    = 3,850 - 1,500 = 2,350

    Therefore:

    Operating Leverage =

    3,850/2,350

    = 1.64
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