Fost corporation's contribution margin ratio is 20%. if the degree of operating leverage is 15 at the $225,000 sales level, net operating income at the $225,000 sales level must equal: multiple choice $2,250 $6,750 $3,000 $5,063

$3,000

Explanation:

The computation of the degree of operating leverage is shown below:

Degree of operating leverage = (Sales - Variable costs) ÷ (Sales - Variable costs - Fixed costs)

15 = $45,000 ÷ net operating income

So, the net operating income would be

= $45,000 ÷ 15

= $3,000

The (Sales - Variable costs) = Contribution margin

The  (Sales - Variable costs - Fixed costs) = EBIT  or net operating income

And, the contribution margin  would equal to

= Sales level × contribution margin ratio

= $225,000 × 20%

= $45,000

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