U.S. Steal has the following income statement data: Compute DOL based on the for
ID: 2737213 • Letter: U
Question
U.S. Steal has the following income statement data:
Compute DOL based on the formula below. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Percent change in operating income
Recompute DOL using the formula given below. There may be a slight difference due to rounding. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Q(P VC)
Sold Total
Variable
Costs Fixed
Costs Total
Costs Total
Revenue Operating
Income
(Loss) 65,000 $ 195,000 $ 40,000 $ 235,000 $ 325,000 $ 90,000 85,000 255,000 40,000 295,000 425,000 130,000
Explanation / Answer
Units Total Fixed Total Total Operating Sold Variable Costs Costs Revenue Income Costs (Loss) Change in Operating income Change in units sold P VC 65,000 $ 195,000 $ 40,000 $ 235,000 $ 325,000 $ 90,000 5 3 85,000 255,000 40,000 295,000 425,000 130,000 40000 20000 5 3 a. DOL= Percent change in operating income/Percent change in units sold =(40000/90000 *100)/(20000/65000*100) 1.44 Degree of operating leverage 1.44 b. DOL= Q(P VC)/(Q(P VC) FC) =65000*(5-3)/(65000*(5-3)-40000) 1.44
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