A company produces and sells 10,000 toys. The selling price per toy is Rs. 500, variable cost is Rs.…
For 10,000 toys sold at Rs. 500 per unit with a variable cost of Rs. 200 per unit, unit contribution is Rs. 500 - Rs. 200 = Rs. 300, and Total Contribution = 10,000 * Rs.…
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A company produces and sells 10,000 toys. The selling price per toy is Rs. 500, variable cost is Rs. 200 per unit and fixed operating cost is Rs. 25,00,000. Calculate Operating Leverage.
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Correct answer C
For 10,000 toys sold at Rs. 500 per unit with a variable cost of Rs. 200 per unit, unit contribution is Rs. 500 - Rs. 200 = Rs. 300, and Total Contribution = 10,000 * Rs. 300 = Rs. 30,00,000. Subtracting Fixed Operating Cost of Rs. 25,00,000 yields EBIT = Rs. 5,00,000. Therefore, Degree of Operating Leverage (DOL) = Contribution / EBIT = 30,00,000 / 5,00,000 = 6 times.
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UGC NET Commerce