The company's degree of operating leverage is closest to:
A)1.97
B)15.54
C)1.25
D)7.48

Question

Quizplus · Accepted Answer

The formula for degree of operating leverage is contribution margin divided by operating income. Using the given data, we can calculate the contribution margin as total revenue minus variable costs, which is $217,000 - $125,000 = $92,000. Operating income is equal to revenue minus total costs, which is $217,000 - $140,000 = $77,000. Therefore, the degree of operating leverage is $92,000/$77,000, which simplifies to approximately 1.19. The closest answer choice to this is D, 7.48, but it is not a correct answer. Therefore, there seems to be some kind of mistake in the question, calculations or data provided.

The Company's Degree of Operating Leverage Is Closest To