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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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