Mary Smith sells gourmet chocolate chip cookies. The results of her last month of operations are as follows:
|
Sales revenue |
$50,000 |
|
Cost of goods sold (all variable) |
26,000 |
|
Gross margin |
24,000 |
|
Selling expenses (20% variable) |
8,000 |
|
Administrative expenses (60% variable) |
12,000 |
|
Operating income |
$ 4,000 |
Required
- What is Mary”s degree of operating leverage?
- If Mary can increase sales by 10%, by how much will her operating income increase?