ACorp has fixed costs of 14 million and profits of 7 million

ACorp has fixed costs of $14 million and profits of $7 million. What is its degree of operating leverage (DOL)? (DOL defined here as 1 +fixed costs/profit.) (Do not round intermediate calculations. Round your answer to 2 decimal places.) Degree of operating leverage

Solution

Degree of operating leverage=1+(Fixed cost/Profits)

=1+(14/7)

which is equal to

=3.