Last year Avator's operating income (EBIT)increased by 22 percent while its dollar sales increased by 15%. What is Avator's degree of operating leverage (DOL)?
A).68
B)2.0
C)1.47
D).32

Question

Quizplus · Accepted Answer

Degree of operating leverage (DOL) is calculated as the percentage change in operating income (EBIT) divided by the percentage change in sales.

DOL = (%change in EBIT) / (%change in sales)

Here, %change in EBIT = 22%
%change in sales = 15%

DOL = 22 / 15 = 1.47

Therefore, the correct answer is C.

Last Year Avator's Operating Income (EBIT)increased by 22 Percent While