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Elite Company had originally expected to earn operating income of $140,000 in the coming year. Elite's degree of operating leverage is 2.6. Recently, Elite revised its plans and now expects to increase sales by 25% next year. What is the percent change in operating income expected by Elite in the coming year

Respuesta :

Answer:

65%

Explanation:

The computation of the percentage change in operating income is shown below:

Degree of Operating leverage =  Percentage  change in operating income ÷ Percentage change in sales

2.6 = Percentage change in operating income ÷ 25%

So,

Percentage change in operating income is

= 2.6 × 25%

= 65%

We simply multiplied the degree of operating leverage with the percentage in sales so that the percentage change in operating income could come