Homework SourseWhat is the degree of operating leverage Round your answer t
What is the degree of operating leverage? (Round your answer to 2 decimal places.)
Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 4% increase in sales? Do not round intermediate calculations. Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34).
Assume that the amounts of the company’s total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $6,232 and the total fixed expenses are $12,100. Under this scenario and assuming that total sales remain the same, what is the degree of operating leverage? (Round your answer to 2 decimal places.)
Assume that the amounts of the company\'s total variable expenses and total fixed expenses were reversed. In other words, assume that the total variable expenses are $6,232 and the total fixed expenses are $12,100. Given this scenario, and assuming that total sales remain the same, calculate the degree of operating leverage. Using the calculated degree of operating leverage, what is the estimated percent increase in net operating income of a 4% increase in sales? Do not round intermediate calculations. Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34).
[The following information applies to the questions displayed below.] Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units) Sales Variable expenses $20,300 12,100 Contribution margin Fixed expenses 8,200 6,232 Net operating income $ 1,968
Solution
(B) Percentage increase in net operating income of a 4% increase in sales :
Degree of operating leverage (a) = 4.17
Percentage increase in sales (b) = 4%
Percentage increase in net operating income (a) * (b) = 4.17 * 4% = 0.1668 = 16.68%
(D) Percentage increase in sales 4% when variable and fixed expenses amounts are interchanged
Degree of operating leverage (a) = 7.15
Percentage increase in sales (b) = 4%
Percentage increase in net operating income (a) * (b) = 7.15 * 4% = 28.60%
| Sales | 20300 |
| Less : Variable Expenses | 12100 |
| Contribution Margin | 8200 |
| Less : Fixed Expenses | 6232 |
| Net Operating Income | 1968 |
| Operating Leverage = Contribution Margin / Net Operating Income | |
| = 8200 / 1968 = 4.17 | |
