Total variable costs are $15,000, sales $50,000, and fixed costs $15,000; calculate DOL.

Question

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The Degree of Operating Leverage (DOL) is calculated using the formula: DOL = [Q(P-V)] / [Q(P-V) - F], where Q is the quantity sold, P is the price per unit, V is the variable cost per unit, and F is the fixed cost. However, without the quantity sold, we can use the total figures: DOL = (Sales - Variable Costs) / (Sales - Variable Costs - Fixed Costs) = ($50,000 - $15,000) / ($50,000 - $15,000 - $15,000) = $35,000 / $20,000 = 1.75.

Total Variable Costs Are $15,000, Sales $50,000, and Fixed Costs