When Quineboag Textile's sales revenue increased from $5.0 million to $5.25 million,net operation income increased from $500,000 to $575,000.Quineboag's degree of operating leverage (DOL)is ________.
A).015
B).33
C)3.00
D)10

Question

Quizplus · Accepted Answer

Degree of Operating Leverage (DOL) = % change in operating income / % change in sales revenue

% change in operating income = (575,000 - 500,000) / 500,000 = 0.15 or 15%

% change in sales revenue = (5,250,000 - 5,000,000) / 5,000,000 = 0.05 or 5%

DOL = 0.15 / 0.05 = 3.00

When Quineboag Textile's Sales Revenue Increased from $5