A manufacturer of tiling grout has supplied the following data: The company's degree of operating leverage is closest to:
A)14.77
B)2.65
C)4.77
D)2.27

Question

A manufacturer of tiling grout has supplied the following data:  The company's degree of operating leverage is closest to:
A)14.77 
B)2.65 
C)4.77 
D)2.27

Quizplus · Accepted Answer

The degree of operating leverage (DOL) can be calculated by dividing the percentage change in operating income by the percentage change in volume. Using the data provided, we can calculate the DOL at a volume of 620,000 units as follows:

DOL = (281,000 - 153,650) / (281,000 - 177,100) = 4.77

Therefore, the company's degree of operating leverage is closest to 4.77, which is option C.

A Manufacturer of Tiling Grout Has Supplied the Following Data