The degree of operating leverage for July is closest to (round your final answer to two decimal places. )

Question

Quizplus · Accepted Answer

Degree of operating leverage (DOL) = % change in operating income / % change in sales

First, we need to calculate the current operating income and sales:
Operating income = (300,000 – 200,000) = 100,000
Sales = 500,000

Next, we need to calculate the operating income and sales for the 10% increase in sales:
Operating income = (0.2 * 500,000) = 100,000
Sales = 550,000

Now, we can calculate the DOL:
DOL = (100,000 – 85,000) / (85,000 / 100) / (550,000 – 500,000) / (500,000 / 100) = 4.48

Therefore, the closest answer is C, 4.48.

The Degree of Operating Leverage for July Is Closest to (Round