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Sales ₹10,00,000; Variable Cost ₹6,00,000; Fixed Cost ₹2,00,000. Operating Leverage is:
A1.5
B2.5
C2.0
D3.0
Answer & Solution
Correct answer: C. 2.0
1. Contribution = Sales − VC = 10 − 6 = ₹4 lakh.
2. EBIT = Contribution − Fixed = 4 − 2 = ₹2 lakh.
3. DOL = Contribution / EBIT = 4 / 2 = 2.0.
_Source: ICAI BoS CA Inter Paper 6A, Ch 6 "Financing Decisions — Leverages", §3.1_
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