The degree of operating leverage can be calculated as:
A)contribution margin divided by sales.
B)gross margin divided by net operating income.
C)net operating income divided by sales.
D)contribution margin divided by net operating income.

Question

Quizplus · Accepted Answer

The degree of operating leverage (DOL) measures the sensitivity of net operating income to changes in sales. It can be calculated as the percentage change in net operating income divided by the percentage change in sales. Using the formula for contribution margin, DOL can also be calculated as contribution margin divided by net operating income. Option D is the correct answer.

The Degree of Operating Leverage Can Be Calculated As