Company has sales of Rs 500000, variable cost Rs 300000. Fixed cost Rs 100000 and long term loans Rs 400000 at 10% interest. Calculate operating leverage.Options :2453

To calculate the operating leverage, we need to first determine the contribution margin. The contribution margin is calculated by subtracting the variable costs from the sales revenue.

Contribution Margin = Sales - Variable Costs Contribution Margin = Rs 500000 - Rs 300000 Contribution Margin = Rs 200000

Next, we can calculate the operating income. Operating income is calculated by subtracting the fixed costs from the contribution margin.

Operating Income = Contribution Margin - Fixed Costs Operating Income = Rs 200000 - Rs 100000 Operating Income = Rs 100000

Now, we can calculate the degree of operating leverage (DOL). The DOL is calculated by dividing the contribution margin by the operating income.

DOL = Contribution Margin / Operating Income DOL = Rs 200000 / Rs 100000 DOL = 2

Finally, we can calculate the operating leverage by multiplying the DOL by the percentage change in operating income.

Operating Leverage = DOL * Percentage Change in Operating Income Operating Leverage = 2 * 100 Operating Leverage = 200

Therefore, the operating leverage is 200.