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extract of profit/loss statement:
sales —— 60000
COS ——- 50000
————————
PBIT ——– 10000
interest —–4000
————————-
PBT ——– 6000
tax ———- 4500
————————–
PAT——— 1500what is the operational gearing?
a. 2 times
b. 2.5 times
c. .5 times
d. 3 timesthe answer is A and is computed as contribution/PBIT.
but we have not covered this in the syllabus!!!!!!
or am i wrong??
i was doing fc/vc or fc/total costs
🙁
Operational gearing certainly is covered in the free lectures!
There is no standard measure of operational gearing and you just have to use your judgement on the information given and the choice of answers available.
(On the information that you have typed it is not possible to give any answer because there is no breakdown between fixed and variable costs)i apologize. it says 80% of COS is variable.
very very sorry for this omission
No problem, my answer however remains the same. However it seems as though the examiner does regard contribution/PBIT as being the best measure – this is the first time he has asked for a calculation of operational gearing as an MCQ. The only other time he has asked it, it was in a long-form question and he allowed various ways of measuring it (because there is no standard measure).
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