Given the following information, what is the degree of operating leverage? Price = $40 per unit; variable cost = $20 per unit; ﬁxed costs = $95,000 per year; depreciation = $35,000 per year; sales
= 10,000 units per year. Ignore tax effects.
A) 0.9
B) 1.3
C) 1.5
D) 1.9
E) 2.4

Question

Quizplus · Accepted Answer

Degree of operating leverage = (Contribution Margin / Net Income)= [(Price - Variable Cost) * Sales] / [Sales - Fixed Costs - Depreciation]= [($40 - $20) * 10,000] / [10,000 - $95,000 - $35,000]= $200,000 / -$130,000= 1.54

Given the Following Information, What Is the Degree of Operating