Specimen Paper Operational Gearing

This topic has 2 replies, 2 voices, and was last updated 11 years ago by John Moffat.

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December 4, 2014 at 9:03 pm #217708
Remmy
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Sales 60,000
Cost of Sales 50,000
PBIT 10,000
Interest 4000
PBT 6000
Tax 4500
PAT 1500
60% of COS is variable costs
What is the operational gearing?
December 4, 2014 at 9:06 pm #217710
Remmy
Member
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Contribution/PBIT
December 5, 2014 at 7:48 am #217808
John Moffat
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Variable cost = 60% x 50,000 = 30,000
So contribution = 60,000 – 30,000 = 30,000
So contribution/PBIT = 30,000/10,000 = 3.
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