Levin SdnBhd has fixed operating cost of RM72,000, variable cost of RM6.75 per u

Question

Levin SdnBhd has fixed operating cost of RM72,000, variable cost of RM6.75 per unit, and selling price of RM9.75 per unit.
a) Calculate the operating breakeven point in units.
b) Compute the degree of operating leverage (DOL) using the following unit sales levels as a base: 25,000; 30,000; 40,000. Use the formula.
c) Graph the DOL figures that you can computed in part b(on the y axis) against base sale levels (on the x axis).
d) Compute the DOL at 24,000 units; add this point to your graph.
e) What principle does your graph and figures illustrate?

Explanation / Answer

Graph the DOL figures that you can computed in part b(on the y axis) against base sale levels (on the x axis).

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