1 answer

The degree of operating leverage for Williams Company is 5. The actual operating income is $20,000....

Question:

The degree of operating leverage for Williams Company is 5. The actual operating income is $20,000. If the company expects a 45% increase in sales, operating income should increase by $9,000 O True O False

The degree of operating leverage for Williams Company is 5. The actual operating income is $20,000. If the company expects a 45% increase in sales, operating income should increase by $9,000 O True O False

Answers

The statement is false which is shown as below:-
Operating leverage = (%change in operating income/ % change in sales)
= 5 = %change in operating income / 45%
= %change in operating income = (45*5) = 225%
Hence, change in operating income is (20,000*225%) = $45,000
.

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