Homework Answers
Answer is as follows:
Correct Option: It is calculated as the ratio of Contribution Margin(CM), to operating income, at each level of output.
Degree of Operating Leverage is a multiple that measures how much the operating income changes with respect to change in the amount of sales.
It can be measured in the following ways:
Degree of Operating Leverage =
1. Change in Operating Income / Change in Sales
2. Contribution Margin / Operating Income
3. Contibution Margin % / Operating Margin
From formula 2 above we can say that the option 1 from the given choices is True.
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Saved Which of the following statements is true with respect to the degree of operating leverage...
Which of the following statements regarding Operating Leverage is true? The degree of operating leverage is...
Which of the following statements regarding Operating Leverage is true? The degree of operating leverage is the same as the Margin of Safety percentage Organizations with high operating leverage incur more risk of loss when sales decline. The degree of operating leverage is the extent to which the cost function is made up of variable costs. Is measured as Earnings/Contribution Margin
a) Degree of operating leverage = Contribution margin / profit Degree of operating leverage = 15,600,000...
a) Degree of operating leverage = Contribution margin / profit Degree of operating leverage = 15,600,000 / 6,000,000 = 1.625 Sales = 1200000 x 24 = 28800000 Less: Variable cost = 1200000 x 11 = 13200000 Contribution Margin = 28800000 - 13200000 = 15,600,000 Less: Fixed cost = 9,600,000 Profit = 15600000-9600000 = 6000000 b) Break even units Contribution margin per unit = Selling price - variable cost = $24 - $11 = $13 Break even units = Fixed cost...
13.What is the degree of operating leverage? 14.Using the degree of operating leverage, what is the...
13.What is the degree of operating leverage?
14.Using the degree of operating leverage, what is the
estimated percent increase in net operating income of a 5% increase
in sales?
15.Assume that the amounts of the company’s total variable
expenses and total fixed expenses were reversed. In other words,
assume that the total variable expenses are $8,400 and the total
fixed expenses are $21,000. Under this scenario and assuming that
total sales remain the same, what is the degree of operating...
13.What is the degree of operating leverage? 14.Using the degree of operating leverage, what is the...
13.What is the degree of operating leverage?
14.Using the degree of operating leverage, what is the
estimated percent increase in net operating income of a 5% increase
in sales?
15.Assume that the amounts of the company’s total variable
expenses and total fixed expenses were reversed. In other words,
assume that the total variable expenses are $8,400 and the total
fixed expenses are $21,000. Under this scenario and assuming that
total sales remain the same, what is the degree of operating...
Suppose that there are two firms operating in a market. Suppose that the degree of operating leverage...
Suppose that there are two firms operating in a market. Suppose that the degree of operating leverage for Firm 1 is DOL= 1.5 while the degree of operating leverage for Firm 2 is DOL=2 How much would the profits of each firm change if both firms experienced an increase in quantity sold of 10%? Suppose instead that each firm experiences a 5% decrease in quantity sold. What would happen to the profits of each firm? Which firm’s profits are more sensitive to...
Degree of Operating Leverage
Exercise 9-32 (Static) Degree of Operating Leverage (DOL) [LO 9-5]TastyKreme and Krispy Kake are both producers of baked goods, but each has followed a different production strategy. The differences in their strategies resulted in differences in their cost structure, as shown in the following table: TastyKremeKrispy KakeEstimated sales in units20,00015,000Unit price6.008.00Variable cost per unit3.003.00Total fixed costs$ 30,000$ 45,000 Required:1. Compute the operating income and degree of operating leverage for each company. (Round "Degree of operating leverage" to 1 decimal place.)2. Assuming sales volume for...
11-15 please. 12. what is the degree of operating leverage? 13. using the degree of operating...
11-15 please.
12. what is the degree of operating leverage?
13. using the degree of operating leverage, what is the
estimated percent increase in net operating income of a 5% increase
in sales?
14.assume that the amounts of the company's total variable
expenses and total fixed expenses were reversed. in other wrds,
assume that the total variable expenses are $27,720 and the total
fixed expenses are $73,500. under this scenario and assuming that
total sales remain the same, what is...
Exercise 9-32 Degree of Operating Leverage (DOL) (LO 9-5] Tasty Kreme and Krispy Kake are both...
Exercise 9-32 Degree of Operating Leverage (DOL) (LO 9-5] Tasty Kreme and Krispy Kake are both producers of baked goods, but each has followed a different production strategy. The differences in their strategies resulted in differences in their cost structure, as shown in the following table: Estimated sales in units Unit price Variable cost per unit Total fixed costs TastyKreme Krispy Kake 28,000 27,000 8 8 5 $ 42,000 $81,000 3 Required: 1. Compute the operating income and degree of...
D Chapter 20 handouts De Layout References Mailings Review View E20-35Computing degree of operating leverage Following...
D Chapter 20 handouts De Layout References Mailings Review View E20-35Computing degree of operating leverage Following is the income statement for Marrow Mufflers for the month of June 2018: MARROW MUFFLERS Contribution Margin Income Statement Month Ended June 30, 2018 Net Sales Revenue (140 units x 5250) Variable Costs (140 units X 550) Contribution Margin Fixed Costs Operating Income $ 35,000 7,000 28,000 11,500 $ 16,500 Requirements 1. Calculate the degree of operating leverage. (Round to four decimal places.) 2...
Question 10 Which of the following is true about the degree of operating leverage? Operating leverage...
Question 10 Which of the following is true about the degree of operating leverage? Operating leverage is higher if fixed operating costs are high relative to variable operating costs Higher operating leverage increases the sensitivity of operating income to changes in sales Operating leverage magnifies both profits and losses, helping in the good times and causing pain in the bad times All of the above
13.What is the degree of operating leverage?
14.Using the degree of operating leverage, what is the
estimated percent increase in net operating income of a 5% increase
in sales?
15.Assume that the amounts of the company’s total variable
expenses and total fixed expenses were reversed. In other words,
assume that the total variable expenses are $8,400 and the total
fixed expenses are $21,000. Under this scenario and assuming that
total sales remain the same, what is the degree of operating...
13.What is the degree of operating leverage?
14.Using the degree of operating leverage, what is the
estimated percent increase in net operating income of a 5% increase
in sales?
15.Assume that the amounts of the company’s total variable
expenses and total fixed expenses were reversed. In other words,
assume that the total variable expenses are $8,400 and the total
fixed expenses are $21,000. Under this scenario and assuming that
total sales remain the same, what is the degree of operating...
11-15 please.
12. what is the degree of operating leverage?
13. using the degree of operating leverage, what is the
estimated percent increase in net operating income of a 5% increase
in sales?
14.assume that the amounts of the company's total variable
expenses and total fixed expenses were reversed. in other wrds,
assume that the total variable expenses are $27,720 and the total
fixed expenses are $73,500. under this scenario and assuming that
total sales remain the same, what is...
Exercise 9-32 Degree of Operating Leverage (DOL) (LO 9-5] Tasty Kreme and Krispy Kake are both producers of baked goods, but each has followed a different production strategy. The differences in their strategies resulted in differences in their cost structure, as shown in the following table: Estimated sales in units Unit price Variable cost per unit Total fixed costs TastyKreme Krispy Kake 28,000 27,000 8 8 5 $ 42,000 $81,000 3 Required: 1. Compute the operating income and degree of...
D Chapter 20 handouts De Layout References Mailings Review View E20-35Computing degree of operating leverage Following is the income statement for Marrow Mufflers for the month of June 2018: MARROW MUFFLERS Contribution Margin Income Statement Month Ended June 30, 2018 Net Sales Revenue (140 units x 5250) Variable Costs (140 units X 550) Contribution Margin Fixed Costs Operating Income $ 35,000 7,000 28,000 11,500 $ 16,500 Requirements 1. Calculate the degree of operating leverage. (Round to four decimal places.) 2...
Question 10 Which of the following is true about the degree of operating leverage? Operating leverage is higher if fixed operating costs are high relative to variable operating costs Higher operating leverage increases the sensitivity of operating income to changes in sales Operating leverage magnifies both profits and losses, helping in the good times and causing pain in the bad times All of the above
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