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 $98,000,000.What is Stromburg's degree of operating leverage at the new projected sales level?

A) 3.8141
B) 4.4100
C) 3.9730
D) 3.0989
E) 4.0127