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?
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