Answer:
4 times
Explanation:
Given that,
Initial sales = $80,000
New sales = $84,000
Initial net operating income = $30,000
New net operating income = $36,000
The degree of operating leverage is determined by dividing the percentage change in net operating income by the percentage change in the sales.
Percentage change in net operating income:
= [(New net operating income - Initial net operating income) ÷ Initial net operating income] × 100
= [($36,000 - $30,000) ÷ $30,000] × 100
= ($6,000 ÷ $30,000) × 100
= 0.2 × 100
= 20%
Percentage change in sales:
= [(New sales - Initial sales) ÷ Initial sales] × 100
= [($84,000 - $80,000) ÷ $80,000] × 100
= ($4,000 ÷ $80,000) × 100
= 0.05 × 100
= 5%
Degree of operating leverage:
= Percentage change in net operating income ÷ Percentage change in sales
= 20 ÷ 5
= 4 times
