A proposed project has fixed costs of $82,000 per year. The operating cash flow

Question

A proposed project has fixed costs of $82,000 per year. The operating cash flow at 6,200 units is $88,400. Ignoring the effect of taxes, what is the degree of operating leverage? (Do not round intermediate calculations. Round your answer to 4 decimal places, e.g., 32.1616.)

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what is the operating cash flow?

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A proposed project has fixed costs of $82,000 per year. The operating cash flow at 6,200 units is $88,400. Ignoring the effect of taxes, what is the degree of operating leverage? (Do not round intermediate calculations. Round your answer to 4 decimal places, e.g., 32.1616.)

Explanation / Answer

Degree of operating income:

= Total contribution÷Operating income

= ($88,400+$82,000)÷$88,400

= 1.9276

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