Question

Bristo Corporation has sales of 2,080 units at $50 per unit. Variable expenses are 25% of the selling price. If total fixed expenses are $68,000, the degree of operating leverage is:____________

Answer 1

Answer:

Degree of operating leverage = 7.8

Explanation:

given data

sales = 2,080 units

per unit price  = $50

Variable expenses = 25%

total fixed expenses = $68,000

solution

we get here Degree of operating leverage that is express as

Degree of operating leverage = Sales - variable cost ÷ (sales - variable cost - fixed cost)   .......................1

here

Sales = 2080 × 50  = 104000

and

Variable cost = 104000  × 25%  = 26000

so now put value in equation 1 we get

Degree of operating leverage = $\frac{104000-26000}{104000-26000-68000}$  

Degree of operating leverage = 7.8