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

The degree of operating leverage can be calculated as follows:

DOL = (Contribution Margin / Operating Income)

Using the figures from the contribution format income statement, we get:

DOL = ($225,000 / $75,000) = 3.0

Therefore, the company's degree of operating leverage is 3.0.

The Following Is Last Month's Contribution Format Income Statement