Question

Mercantile corporation has sales of $2,000,000, variable costs of $800,000, and fixed costs of $900,000. mercantile’s degree of operating leverage is

Answer 1

The degree of operating leverage can be calculated by subtracting variable costs from sales and dividing it by sales minus variable costs and fixed costs.

The degree of operating leverage is
(2,000,000−800,000)
÷(2,000,000−800,000
−900,000)=4