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what is the formula of operating leverage. Change in operating income. It is the percentage change in operating profit relative to sales.
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The degree of operating leverage or DOL can be calculated using the following formula. Degree of Operating Leverage 700 175. Operating Leverage Quantity x Price Variable Cost Per Unit Quantity x Price Variable Cost Per Unit Fixed Operating Costs The operating leverage formula can also be expressed in a simpler manner.
Operating Leverage Sales Variable Costs Profits Example of an operating leverage calculation.
To calculate operating leverage divide an entitys contribution margin by its net operating income. Change in sales. Change in operating income. For example the Alaskan Barrel Company ABC has the following financial results.
