Use the following information to answer questions
Wild Bear Corp. sells tents for $250. The company produced and sold 5,000 tents in 2010 and incurred the following costs:
Variable production cost per tent $125
Fixed production cost $195,000
Variable selling expense per tent $25
Fixed selling and administrative cost $135,000
The company had expected to sell 3,900 units in 2010. Wild Boar's tax rate is 30%.
-Wild Boar's degree of operating leverage for 2010 was

Question

Use the following information to answer questions 
Wild Bear Corp. sells tents for $250. The company produced and sold 5,000 tents in 2010 and incurred the following costs:
Variable production cost per tent $125
Fixed production cost $195,000
Variable selling expense per tent $25
Fixed selling and administrative cost $135,000
The company had expected to sell 3,900 units in 2010. Wild Boar's tax rate is 30%.
-Wild Boar's degree of operating leverage for 2010 was

Quizplus · Accepted Answer

The degree of operating leverage (DOL) is calculated as: DOL = Contribution Margin / Operating Income. Contribution Margin = (Selling Price - Variable Costs) * Quantity Sold = ($250 - $125 - $25) * 5,000 = $500,000. Operating Income = Contribution Margin - Fixed Costs = $500,000 - ($195,000 + $135,000) = $170,000. DOL = $500,000 / $170,000 = 2.94.

Use the Following Information to Answer Questions