Goodman Company has sales of 3,000 units at $80 per unit.Variable costs are 35% of the sales price.If total fixed costs are $66,000,what is the degree of operating leverage rounded to 2 decimal places?

Question

Quizplus · Accepted Answer

The degree of operating leverage (DOL) is calculated as: DOL = Contribution Margin / Operating Income. Contribution Margin per unit = Sales price - Variable cost per unit = $80 - ($80 * 0.35) = $52. Total Contribution Margin = 3,000 units * $52 = $156,000. Operating Income = Total Contribution Margin - Fixed Costs = $156,000 - $66,000 = $90,000. DOL = $156,000 / $90,000 = 1.73.

Goodman Company Has Sales of 3,000 Units at $80 Per