The following is last month's contribution format income statement: What is the company's degree of operating leverage?

Question

The following is last month's contribution format income statement:  What is the company's degree of operating leverage?

Quizplus · Accepted Answer

Degree of Operating Leverage (DOL) = Contribution Margin / Operating Income 
From the given income statement, Contribution Margin = $105,000 - $70,000 = $35,000 
Operating Income = $15,000 
Therefore, DOL = $35,000 / $15,000 = 2.33 
Rounded to the nearest whole number, the degree of operating leverage is 3.000 (option C).

The Following Is Last Month's Contribution Format Income Statement