The company's degree of operating leverage is closest to:
A)14.77
B)2.65
C)4.77
D)2.27

Question

Quizplus · Accepted Answer

The degree of operating leverage (DOL) formula is (Q × (P - V)) ÷ (Q × (P - V) - F), where Q is the quantity sold, P is the price per unit, V is the variable cost per unit, and F is the fixed cost. Since we do not have the exact values of Q, P, V, and F, we cannot calculate the DOL directly. However, we know that the DOL is directly related to the company's fixed costs, as a higher fixed cost will result in a higher DOL. Therefore, we can compare the fixed costs of each choice to determine the most likely DOL. Choice C has the highest fixed costs, indicating a higher DOL than the other choices.

The Company's Degree of Operating Leverage Is Closest To