The local golf range sells its product for $9 per unit. The variable cost per unit is $2 and the fixed operating costs are $3,000. The degree of operating leverage at 20,000 units produced and sold is closest to:
A) 1.022.
B) 7.000.
C) 10.218.
D) 2857.142.

Question

Quizplus · Accepted Answer

Degree of operating leverage = (Contribution Margin / Operating Income)Contribution Margin = (Selling Price - Variable Cost) * Units Sold= ($9 - $2) * 20,000 = $140,000Operating Income = Contribution Margin - Fixed Costs= $140,000 - $3,000 = $137,000Degree of operating leverage = $140,000 / $137,000 = 1.022

The Local Golf Range Sells Its Product for $9 Per