Paxton Corp has provided the following data concerning its operations last month: Sales Variable expenses $400,000...

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Paxton Corp has provided the following data concerning its operations last month: Sales Variable expenses $400,000 $250,000 $

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Answer 1

Answer #1

Notes

This ratio is used to find impact of cahnge in operting income due to change in sales. The DOL measures hpw much operatingincome effects in response to cahnge in sales.

Computation

Computation of Contributio & Net operting income

		Sales	$ 400,000
	Less	Variable expenses	( $ 250,000)
		Contribution margin	1,50,000
	Less	Fixed exepenses	( $ 100,000 )
		Net opertaing Income	50,000

Degree of operating levereage =	Contribution margin
Net operting Income

Therefore DOL

Degree of operating levereage =

150,000/50,000 = 3

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Answer 2

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