Homework Answers
Answer:
- The correct answer is option A (9.0).
Explanation:
Given data:
- Net operating income(NOI) = $ 37,00,000
- Degree of operating leverage (DOL) = 1.80
Calculation of contribution margin:
| Particulars | Amount | Amount |
| Contribution margin |
= DOL x NOI =1.80 x $37,00,000 =$ 66,60,000 |
$ 66,60,000 |
Calculation of Fixed cost:
| Particulars | Amount | Amount |
| Fixed cost |
= Contribution margin - NOI = $ 66,60,000-$ 37,00,000 = $ 29,60,000 |
$ 29,60,000 |
Calculation of Degree of Operating Leverage:
| Particulars | Amount | Amount |
| Degree of operating leverage |
=Contribution margin / NOI = ($ 66,60,000 * 50%) / ($66,60,000 * 50% - 2960000) = $ 33,30,000 /($ 33,30,000 - $ 29,60,000) = $ 33,30,000 / $ 3,70,000 = 9.0 |
9.0 |
Therefore ,the answer Degree of operating leverage is 9.0
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