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Question - The Income Statement for Gate Ltd as 31st December 2020 is shown below:
Gate Ltd
£
Sales
1,400,000
Cost of sales
-400,000
Gross profit
1,000,000
Administrative expenses
-670,000
Operating profit
330,000
Interest expense
-60,000
Earnings before tax
270,000
Taxation
-54,000
Earnings after tax
216,000
Assume that Cost of sales is a variable expense while Administrative expenses are a fixed expense. Calculate the Operating leverage for Gate Ltd.
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