Shelton Company Below is an income statement for Shelton Company:
$\begin{array}{ll}
\text { Sales } & \$ 600,000 \
\text { Variable costs } & \underline{(150,000)} \
\text { Contribution margin } & \$ 450,000 \
\text { Fixed costs } & \underline{(300,000)} \
\text { Profit before taxes } & \underline{\$ 150,000}
\end{array}$ Refer to Shelton Company.What is Shelton's degree of operating leverage?
A)1.33
B)2.00
C)3.00
D)4.00

Question

Quizplus · Accepted Answer

The degree of operating leverage (DOL) is calculated as Contribution Margin / Profit Before Taxes. For Shelton Company, DOL = $450,000 / $150,000 = 3.00.

Shelton Company Below Is an Income Statement for Shelton Company