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Morse Company reports total contribution margin of $48,000 and pretax net income of $12,000 for the current month. The degree of operating leverage is:a. 4.0b. 0.25c. 1.25d. 2.5e. 250%

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ahmedgodtrust

Answer:

Degree of operating leverage  

= Sales -Variable cost

  Sales - Variable cost - Fixed cost

= Contribution

   Pre-tax net income

= $48,000/$12000

= 4

The correct answer is A

Explanation:

Degree of operating leverage is the ratio of contribution to pre-tax net income. Contribution = $48,000 and pre-tax net income = $12,000.

The division pf contribution by pre-tax net income gives the degree of operating leverage.

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