Compute DOL based on the formula below. (Do not round intermediate calculations.

Question

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)

U.S. Steal has the following income statement data: value 12.50 points You did not receive credit for this question in a previous attempt U.S. Steal has the following income statement data Total Variable Costs Total Costs Revenue (Loss) Operating Income Total Units Sold 60,000 $120,000 $ 50,000 $ 170,000 $ 360,000 $ 190,000 80,000 Fixed Costs 160.000 50,000 210,000 480,000 270,000 The top row of the table has the beginning values and the bottom row of the table has the ending values a. Compute DOL based on the formula below. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Percent change in o ating income DOL Percent change in units sol Degree of operating leverage b. 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.) P-V Q represents beginning units sold (all calculations should be done at this level) P can be found by dividing total revenue by units sold VC can be found by dividing total variable costs by units sold Degree of operating leverage Hints References eBook & Resources Hint #1

Explanation / Answer

Question a. Change % of Change Sales Units 60000 80000 20000 0.333333 Operating Income 190000 270000 80000 0.421053 Degree of Operating Leverage = 0.4211/0.3333 = 1.26 Question B DOL = Q(P-VC)/(Q(P-VC)-FC) Or DOL = (QP -QxVC)/((QP-QxVC)-FC) Or DOL = (360,000-120,000)/((360,000-120,000)-50000) Or DOL =240,000/(240000-50000) Therefore DOL = 1.26

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