If a corporation's DOL is 3 then
A) for every 5 % change in sales, operating income will change by 15%.
B) every 10% change in sales operating income will change by 30%.
C) for every 1% change in sales, operating income will change by 3%.
D) all of the above.

Question

Quizplus · Accepted Answer

The Degree of Operating Leverage (DOL) measures the sensitivity of a company's operating income to its sales. A DOL of 3 means that for any given percentage change in sales, the operating income will change by three times that percentage. Therefore, all the given options correctly describe the implications of a DOL of 3.

If a Corporation's DOL Is 3 Then