Question

International, Inc. has sales of $150, fixed operating costs of $20, and a variable cost ratio of .55. It has 40 common shares outstanding and a tax rate of .26. What is International, Inc's. DOL?

Answer 1

Degree of operating leverage	=	Contribution Margin	/	Net Operating income
	=	$    67.50	/	$    47.50
	=	1.42
Working;
	Income Statement:
			Total
	Sales	a	$     150.00
	Variable cost	b=a*.55	$       82.50
	Contribution Margin		$       67.50
	Fixed Cost		$       20.00
	Net Operating incomee		$       47.50