Chapter 11, Problem 17CDQ

To determine

Concept Introduction:

Degree of operating leverage:

The Degree of operating leverage shows the relation between change in net operating income and change in sales. The formulas for degree of operating leverage are as follows:

  $Degreeofoperatingleverage=\frac{ContributionMargin}{Operatingincome}$

  $Changeinoperatingincome=Changesinsales\times Degreeofoperatingleverage$

To Indicate:

The meaning of Degree of operating leverage and its calculation