Picasso pantry degree of operating leverage

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Reference no: EM131084857

Picasso"s Pantry is a chain of arts and crafts stores. Results for the most recent year are as follows:

Sales		$9,000,000
Variable expenses	$5,000,000	7,000,000
Fixed expenses	2,000,000	$2,000,000
Total expenses Operating income

Required

What is Picasso"s Pantry"s degree of operating leverage?
If sales increase by 5%, what will the new operating income be?
Managers are considering changing Picasso"s cost structure by offering employees a commission on sales rather than a fixed salary. What effect would such a change have on the firm"s operating leverage?

Reference no: EM131084857

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