If Q equals the level of output, P is the selling price per unit, V is the variable expense per unit, and F is the fixed expense, then the degree of operating leverage is equal to:
A)Q/(P-V).
B)F/(P-V).
C)F/[(P-V)/P].
D)[(P-V)Q]/[(P-V)Q-F].

Question

Quizplus · Accepted Answer

The degree of operating leverage (DOL) is calculated as the contribution margin divided by the contribution margin minus fixed expenses. The contribution margin is (P-V)Q, and the formula for DOL is [(P-V)Q]/[(P-V)Q-F].

If Q Equals the Level of Output, P Is the Selling