Alpha Corporation reported the following data for its most recent year: sales, $700,000; variable expenses, $490,000; and fixed expenses, $140,000. The company's degree of operating leverage is closest to:
A) 10.00
B) 4.00
C) 3.00
D) 3.30

Question

Quizplus · Accepted Answer

Degree of operating leverage (DOL) = contribution margin / net income
Contribution margin = sales - variable expenses = $700,000 - $490,000 = $210,000
Net income = sales - variable expenses - fixed expenses = $700,000 - $490,000 - $140,000 = $70,000
DOL = $210,000 / $70,000 = 3.00

Alpha Corporation Reported the Following Data for Its Most Recent