If EBIT doubles when sales doubles,then the firm's degree of operating leverage must be exactly two.

Question

Quizplus · Accepted Answer

The degree of operating leverage (DOL) measures the percentage change in operating income (EBIT) for a given percentage change in sales. A DOL of exactly two means that EBIT would increase by 2% for every 1% increase in sales. However, if EBIT doubles when sales double, it indicates a proportional (1:1) relationship between sales and EBIT, not a leverage effect of exactly two. The DOL could be different based on other factors affecting costs and sales.

If EBIT Doubles When Sales Doubles,then the Firm's Degree of Operating