If Leaning Marcus' had an increase in EBIT of 24 percent with an accounting degree of operating leverage of 1.2, then the firm must have had a 20 percent increase in revenue if no other changes were involved.

Question

Quizplus · Accepted Answer

The formula for accounting degree of operating leverage is %Δ EBIT / %Δ Revenue. If %Δ EBIT is 24% and the accounting degree of operating leverage is 1.2, then we can solve for %Δ Revenue as follows:

1.2 = 24% / %Δ Revenue
%Δ Revenue = 24% / 1.2
%Δ Revenue = 20%

Therefore, the firm must have had a 20% increase in revenue if no other changes were involved.

If Leaning Marcus' Had an Increase in EBIT of 24