Assume total sales of $656000, total variable costs of $328000, and total fixed costs of $246000....

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Question

Assume total sales of $656000, total variable costs of $328000, and total fixed costs of $246000....

Assume total sales of $656000, total variable costs of $328000, and total fixed costs of $246000. Of these amounts $164000 of the variable costs are product costs, and $82000 of the fixed costs are period costs. What is the degree of operating leverage?

0.25

4.00

8.00

2.00

business accounting

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Answer 1

Answer #1

Answer:

Degree of Operating Leverage = Contribution margin / Operating Income

Contribution Margin = Sales - Variable Costs

= $ 656,000 - $ 328,000

= $ 328,000

Operating Income = Sales - Variable Costs - Fixed Costs

= $ 656,000 - $ 328,000 - $ 246,000

= $ 82,000

DOL = $ 328,000 / $ 82,000

= 4

Degree of Operating Leverage is 4

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Answer 2

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Assume total sales of $656000, total variable costs of $328000, and total fixed costs of $246000....