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Calculate the operating leverage for gate ltd

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Reference no: EM133134557

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.

Reference no: EM133134557

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