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    Question

    A company has Sales of ₹5,00,000, Variable Costs of

    ₹3,00,000, and Fixed Costs of ₹1,00,000. What is its Operating Leverage?
    A 1.5 Correct Answer Incorrect Answer
    B 2.0 Correct Answer Incorrect Answer
    C 2.5 Correct Answer Incorrect Answer
    D 3.0 Correct Answer Incorrect Answer
    E 4.0 Correct Answer Incorrect Answer

    Solution

    • Contribution = Sales – Variable Cost = ₹5,00,000 – ₹3,00,000 = ₹2,00,000 • EBIT = Contribution – Fixed Cost = ₹2,00,000 – ₹1,00,000 = ₹1,00,000 • Operating Leverage = Contribution ÷ EBIT = ₹2,00,000 ÷ ₹1,00,000 = 2.0

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