At an output level of 84000 units you calculate that the deg

At an output level of 84,000 units, you calculate that the degree of operating leverage is 1.8. The output rises to 91,000 units.

What will the percentage change in operating cash flow be? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Solution

We know that,

Degree of operating Leverage = Percentage change in Operating cash flow / Percentage change in Sales level

Let the Percentage change in Operating cash flow be “X”

1.8=X/[91000-84000/84000]

1.8=X/8.33%

So X =15%