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Alekssandra [29.7K]
3 years ago
11

Alpha Corporation reported the following data for its most recent year: sales, $670,000; variable expenses, $420,000; and fixed

expenses, $200,000. The company's degree of operating leverage is closest to:
Business
1 answer:
MariettaO [177]3 years ago
3 0

Answer:

the degree of operating leverage is 5

Explanation:

The computation of the degree of operating leverage is given below:

= Contribution margin ÷ EBIT

= (Sales - Variable expense) ÷ (Sales - Variable expense - Fixed expense)

= ($670,000 - $420,000) ÷ ($670,000 - $420,000 - $200,000)

= $250,000 ÷ $50,000

= 5

Hence, the degree of operating leverage is 5

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