Figure 4-6.Shorter Company had originally expected to earn operating income of $130,000 in the coming year. Shorter's degree of operating leverage is 2.4. Recently, Shorter revised its plans and now expects to increase sales by 20% next year.
-Refer to Figure 4-6. What is the percent change in operating income expected by Shorter in the coming year?

Question

Quizplus · Accepted Answer

The percent change in operating income is calculated by multiplying the degree of operating leverage (2.4) by the percent change in sales (20%), resulting in a 48% increase in operating income.