What will profits be if sales turn out to be 8.1 million?
The profits of the soy farm with sales of 8.1 million, given an operating leverage of 7, will increase by 26.95%, leading to an increase in profits to 1.02 million.
Understanding Operating Leverage
Operating leverage shows how much the profits will change with a change in sales. In the case of your soy farm, with an operating leverage of 7, it means for every 1% increase in sales, profits will increase 7%.
Calculation
Assuming your initial sales was 7.8 million, your profits lying at 0.8 million, and your predicted sales turn out to be 8.1 million. The percentage change in sales is calculated as:
((8.1-7.8)/7.8)*100 = 3.85%
So, your profits will increase by this percentage times the operating leverage:
(3.85*7) = 26.95%
Hence, your profits would be:
(0.8*1.2695) = 1.02 million (rounded to two decimal places).