Mark Smith Company Below is an income statement for Mark Smith Company:
$\begin{array}{ll}
\text { Sales } & \$ 400,000 \
\text { Variable costs } & (\underline{200,000}) \
\text { Contribution margin } & \$ 200,000 \
\text { Fixed costs } & (\underline{125,000}) \
\text { Profit before taxes }& \underline{\$ 75,000}
\end{array}$ Refer to Mark Smith Company.What is the company's degree of operating leverage (DOL)?
A)2.67
B)3.2
C)5.33
D)10.67

Question

Quizplus · Accepted Answer

The degree of operating leverage (DOL) is calculated as Contribution Margin / Profit Before Taxes. Here, DOL = $200,000 / $75,000 = 2.67.

Mark Smith Company Below Is an Income Statement for Mark