The April contribution format income statement of Iannacone Corporation appears below:
-The degree of operating leverage is closest to:

Question

The April contribution format income statement of Iannacone Corporation appears below: 
-The degree of operating leverage is closest to:

Quizplus · Accepted Answer

Degree of Operating Leverage (DOL) = Contribution Margin / Operating Income

Contribution Margin = Total Sales - Total Variable Expenses = $420,000 - $218,400 = $201,600

Operating Income = Total Sales - Total Variable Expenses - Total Fixed Expenses = $420,000 - $218,400 - $83,400 = $118,200

DOL = $201,600 / $118,200 = 1.70 / 0.49 = 3.47 ≈ 3.50 (rounded to two decimal places)

Therefore, the closest degree of operating leverage is 3.50.

The April Contribution Format Income Statement of Iannacone Corporation Appears