Consider the particulars given below: Sales = Rs. 60,000 Variable cost = Rs. 25,000 Fixed cost = Rs. 30,000 Based on these data, the operating leverage shall be:

The correct answer is A. 5.

Operating leverage is a measure of how much a company’s operating income (EBIT) changes in response to a change in sales. It is calculated by dividing the contribution margin by the operating income.

The contribution margin is the amount of revenue that remains after deducting variable costs. The operating income is the amount of revenue that remains after deducting both variable and fixed costs.

In this case, the contribution margin is $60,000 – $25,000 = $35,000. The operating income is $60,000 – $30,000 = $30,000.

Therefore, the operating leverage is $35,000/$30,000 = 5.

This means that a 1% increase in sales will result in a 5% increase in operating income.

Option B is incorrect because it is the contribution margin divided by the fixed costs. This is not the correct formula for calculating operating leverage.

Option C is incorrect because it is the contribution margin divided by the sales. This is not the correct formula for calculating operating leverage.

Option D is incorrect because it is the fixed costs divided by the operating income. This is not the correct formula for calculating operating leverage.