Ans.a | DOL = Percent change in operating income / Percent change in units sold | |||
0.3529 / 0.25 | ||||
1.41 | (rounded) | |||
*Percent change in operating income = (230000 -170000) / 170000 | ||||
60000 / 170000 | ||||
0.3529 or | 35.29% | |||
*Percent change in units sold = (100000 - 80000) / 80000 | ||||
20000 / 80000 | ||||
0.25 or | 25% | |||
Ans.b | DOL = Q (P - VC) / [Q (P - VC) - FC] | |||
80000 * (5 - 2 ) / [80000 * (5 - 2) - 70000] | ||||
80000 * 3 / [(80000 * 3) - 70000] | ||||
240000 / [240000 - 70000] | ||||
240000 / 170000 | ||||
1.41 | (rounded) | |||
*Calculations: | ||||
Q = 80000 (given) | ||||
P = Total revenue / Units sold | ||||
400000 / 80000 or 500000 / 100000 | ||||
$ 5 per unit | ||||
VC = Total Variable cost / Units sold | ||||
160000 / 80000 or 200000 / 100000 | ||||
$ 2 per unit | ||||
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