Green Company's variable expenses are 75% of sales. At a sales level of $400,000, the company's degree of operating leverage is 8. At this sales level, fixed expenses equal?

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Fixed expenses can be calculated using the degree of operating leverage (DOL) formula: DOL = Contribution Margin / Net Operating Income. Given that the variable expenses are 75% of sales, the contribution margin is 25% of sales (100% - 75%). At a sales level of $400,000, the contribution margin is $100,000 (25% of $400,000). With a DOL of 8, the Net Operating Income is $100,000 / 8 = $12,500. Fixed expenses are the difference between the contribution margin and the Net Operating Income, which is $100,000 - $12,500 = $87,500.

Green Company's Variable Expenses Are 75% of Sales