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A company has total costs of $100,000, of which 40% is variable costs. What is the operating leverage?
Suggested Answer: C
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Choice 'c' is correct. A shortcut computation for operating leverage is the ratio of fixed costs to variable costs. If total cost is $100,000 and variable cost is 40% of total costs (or $40,000), then fixed costs must be 60% (or $60,000). Operating leverage is then calculated as follows:
$60,000/$40,000 = 1.5
Choice 'a' is incorrect. .4 is obtained by dividing $100,000 into the variable cost of $40,000.
Choice 'b' is incorrect. .6 is obtained by dividing total costs into fixed costs.
Choice 'd' is incorrect. 2.5 is obtained by dividing total costs by variable costs.
9 comments · newest first
ME
Mee
11 months ago
Totally agree with 1.5! Makes sense.
WA
Wade
12 months ago
Wait, how can it be that high? Sounds off.
FR
France
12 months ago
Nope, it's actually 1.5!
SU
Susana
12 months ago
I think it's 2.5, right?
ON
Onita
1 year ago
Operating leverage is calculated using fixed and variable costs.
LO
Lorita
1 year ago
Wait, I'm a little confused. I know QinQ has something to do with VLAN stacking, but I'm not sure which VLAN type is specifically designed for that. I'll have to review my study materials again to make sure I understand this properly.
GE
German
1 year ago
I remember us discussing Ethereum, but that was more about smart contracts, right? Not multi-chain networks?
DE
Devorah
1 year ago
I'm a bit unsure about this one. The question mentions the "cluster setup," so I'm wondering if the special boot menu might be the way to configure the ADP settings.
SK
Skye
1 year ago
Hmm, this looks tricky. I'll need to carefully read the code and think through the logic step-by-step.