The degree of operating leverage can be multiplied by a change in sales to determine change in profit.This is the primary use of degree of operating leverage.

Question

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The degree of operating leverage (DOL) helps a company to determine how sensitive its profit is to changes in sales. By multiplying DOL with a change in sales, a company can calculate the expected change in profit. Therefore, the primary use of DOL is to determine the impact of sales changes on profit.

The Degree of Operating Leverage Can Be Multiplied by a Change