A company has a degree of operating leverage of 2.5. If sales increase by 10%, then profits will: Multiple choice question. incr

Question

3 years ago

11

ease by 25% increase by 10% decrease by 10% decrease by 25%

1 answer:

RSB [31] · Answer 1 · 2022-07-20T14:02:26+03:00

Answer:

. increase by 25% increase

Explanation:

The degree of operating leverage (DOL) measures the sensitivity of a company's operating income or profits to changes in the demand

DOL = percentage change in operating income or profits / percentage change in units sold

2.5 = percentage change in operating income / 10%

percentage change in operating income = 10% x 2.5 = 25%

profits will increase by 25%