What is the degree of operating leverage for Flippin' Out Company, a maker of scuba flippers, if the firm sells its finished product for $50 per unit with variable costs per unit of $15? The company has fixed operating costs of $2,000,000 and sells 200,000 units (the answer is rounded).
A)2.0
B)3.7
C)6.5
D)1.4

Question

Quizplus · Accepted Answer

Solution: $\frac { 200,000 ( 50 - 15 ) } { 200,000 ( 50 - 15 ) - 2,000,000 } = 1.4$

What Is the Degree of Operating Leverage for Flippin' Out