The following income statement is provided for vargas, inc. sales revenue (2,600 units × $20.10 per unit) $ 52,260 cost of goods sold (variable; 2,600 units × $10.10 per unit) (26,260 ) cost of goods sold (fixed) (4,100 ) gross margin 21,900 administrative salaries (6,100 ) depreciation (5,100 ) supplies (2,600 units × $2.10 per unit) (5,460 ) net income $ 5,240 what is this company's magnitude of operating leverage

3.91

Explanation: We can calculate operating leverage by using following formula:-

where,

contribution = sales - variable cost

                     =  sales - ( variable cost of goods sold + supplies )

                     =  $52,260 - ( $26,260 + $5460)

                     = $20,540

Now, putting the values into equation we get :-

                                          = 3.91

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