Taco Rey Restaurant had the following information available related to its operations from last year:
| Sales (156,000 units) |
$580,000 |
|
|
| Variable costs |
170,000 |
|
|
| Contribution margin |
$410,000 |
|
|
| Fixed costs |
120,000 |
|
|
| Net operating income |
$290,000 |
|
|
Required:
A. What is Taco Rey's operating leverage? If required, round your answer to two decimal places.
B. If sales increased by 25 percent, what would Taco Rey's net operating income be?