Assume total sales of $600,000,total variable costs of $400,000,total fixed costs of $100,000,product costs of $200,000,and period costs of $300,000.What is the degree of operating leverage?

Question

Quizplus · Accepted Answer

The degree of operating leverage (DOL) is calculated as Contribution Margin / Net Operating Income. Contribution Margin = Total Sales - Total Variable Costs = $600,000 - $400,000 = $200,000. Net Operating Income = Contribution Margin - Total Fixed Costs = $200,000 - $100,000 = $100,000. DOL = $200,000 / $100,000 = 2.

Assume Total Sales of $600,000,total Variable Costs of $400,000,total Fixed