If the degree of operating leverage is 4, then a one percent change in quantity sold should result in a four percent change in:
A) unit contribution margin.
B) revenue.
C) variable expense.
D) net operating income.

Question

Quizplus · Accepted Answer

Degree of operating leverage (DOL) is defined as the percentage change in net operating income (NOI) divided by the percentage change in quantity sold. In this case, a DOL of 4 means that a 1% change in quantity sold should result in a 4% change in NOI. Therefore, the correct answer is D- net operating income.

If the Degree of Operating Leverage Is 4, Then a One