Question

At an output level of 58,000 units, you calculate that the degree of operating leverage is 1.6. The output rises to 63,000 units. What will the percentage change in operating cash flow be?

Answer 1

Change in Operating Cash Flow = 13.79 %

Step-by-step explanation:

given data

output level = 58,000 units

degree of operating leverage = 1.6

output rises = 63,000 units

solution

we get here percentage change in operating cash flow for that

Percentage Change in Output we get

Percentage Change in Output = ( output rises - output level ) ÷ output level .........1

Percentage Change in Output =
`(63000-58000)/(58000)`

Percentage Change in Output = 0.08620689655

so here Change in Operating Cash Flow will be as

Change in Operating Cash Flow = Percentage Change in Output × degree of operating leverage ............2

Change in Operating Cash Flow = 0.08620689655 × 1.6

Change in Operating Cash Flow = 13.79 %