Question

# U.S. Steal has the following income statement data: Units Sold Total Variable Costs Fixed Costs Total...

U.S. Steal has the following income statement data:

 Units Sold Total Variable Costs Fixed Costs Total Costs Total Revenue Operating Income (Loss) 105,000 \$ 210,000 \$ 80,000 \$ 290,000 \$ 420,000 \$ 130,000 125,000 250,000 80,000 330,000 500,000 170,000

The top row of the table has the beginning values and the bottom row of the table has the ending values.

a. Compute the degree of operating leverage (DOL) based on the formula below. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

 DOL = Percent change in operating income Percent change in units sold
 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.)

 DOL = Q(P − VC) Q(P − VC) − FC

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

 DOL % change in operating income/ percent change in units sold 30.77%/19.05% 1.62 % change in operating income (170000-130000)/130000 30.77% % change in units sold (125000-105000)/105000 19.05% beginning Year end total evenue 420000 500000 quantity 105000 125000 selling price per unit 4 4 total variable cost 210000 250000 quantity 105000 125000 variable cost per unit 2 2 fixed cost 80000 80000 DOL (125000*(4-2)) / (125000*(4-2)-80000) 1.470588

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