Stromburg Corporation Makes Surveillance Equipment for Intelligence Organizations

Multiple Choice

Stromburg Corporation makes surveillance equipment for intelligence organizations.Its sales are $75,000,000.Fixed costs,including research and development,are $40,000,000,while variable costs amount to 30% of sales.Stromburg plans an expansion which will generate additional fixed costs of $15,000,000,decrease variable costs to 25% of sales,and also permit sales to increase to $100,000,000.What is Stromburg's degree of operating leverage at the new projected sales level?

A) 3.7500
B) 3.9375
C) 4.1344
D) 4.3411
E) 4.5581