At a sales level of $270,000, the magnitude of operating leverage for Donuts Unlimited is 2.8. If sales increase by 15%, profits will increase by:

a.
15%

b.
18.67%

c.
2.8%

d.
42%

Option D is correct (42%)

Explanation:

Option D is correct (42%)

In order to find the  profit we will proceed as follow:

Given data:

Operating leverage for Donuts Unlimited=2.8

Increase in sale=15%

sales level= $270,000

Required:

Increase in Profit=?

Solution:

% Increase In profit/net income=% Increase in Sales*Operating leverage

% Increase In profit=15%*2.8

% Increase In profit=42%

this business is a price setter.

hope this

​participate in networking opportunities that allow you to get to know potential clients, other entrepreneurs, influential people in your community, etc. focus on doing everything you can to cultivate posting word of mouth advertisin