Elite Company had originally expected to earn operating income of $140,000 in the coming year.Elite's degree of operating leverage is 2.6.Recently, Elite revised its plans and now expects to increase sales by 25% next year.What is the percent change in operating income expected by Elite in the coming year?
A) 8%
B) 65%
C) 20%
D) 54%
E) 30%

Question

Quizplus · Accepted Answer

Percentage Change in Operating Income = Degree of Operating Leverage × Percent Change in Sales
Percent change in operating income = 2.6 × 25% = 65%

Elite Company Had Originally Expected to Earn Operating Income of $140,000