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 formula for degree of operating leverage (DOL) is Contribution Margin / Operating Income. From the income statement, we can see that the contribution margin is $105,000 and the operating income is $35,000. Therefore, DOL = $105,000 / $35,000 = 3.0. The company's degree of operating leverage is 3.0.

The Following Is Last Month's Contribution Format Income Statement