Nickleby Ltd sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows: If Nickleby decreases its volume of sales by 10%, what will happen to its degree of operating leverage?
A) It will decrease.
B) It will increase.
C) It will stay the same.
D) Cannot be determined.

Question

Nickleby Ltd sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows:  If Nickleby decreases its volume of sales by 10%, what will happen to its degree of operating leverage?
A) It will decrease. 
B) It will increase. 
C) It will stay the same. 
D) Cannot be determined.

Quizplus · Accepted Answer

The Answer of Nickleby Ltd sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows:  If Nickleby decreases its volume of sales by 10%, what will happen to its degree of operating leverage?
A) It will decrease. 
B) It will increase. 
C) It will stay the same. 
D) Cannot be determined.

Nickleby Ltd Sells Its Single Product for $14 Per Unit