How is the degree of operating leverage useful?
A) It measures the cushion between sales and breakeven sales.
B) It measures the sales revenue needed to reach a target profit.
C) It measures the amount by which a company's sales can decline before losses are incurred.
D) It measures the impact on net operating income of a given percentage change in sales.
E) It measures the impact on net operating income of a given dollar change in sales.

Question

Quizplus · Accepted Answer

The degree of operating leverage is useful because it measures the impact on net operating income of a given percentage change in sales. This helps in understanding how sensitive the operating income is to changes in sales volume.

How Is the Degree of Operating Leverage Useful