Respuesta :
The degree of operating leverage is 5.8.
Given here, total contribution margin is $80040 and pretax net income is $13,800.
Now, we calculate degree of operating leverage by the formula,
Degree of operating leverage = Contribution margin/ net operating income.
Degree of leverage = $80040/$13800
= 5.8
So, the degree of operating leverage is found to be 5.8.
The break-even point of a business is determined using operating leverage, which also aids in determining the right selling prices to cover all expenditures and make a profit.
Regardless of whether they sell any units of product, businesses with significant operational leverage must cover a bigger amount of fixed costs each month. Companies with a high ratio of fixed operating costs to variable operating costs have the most operating leverage.
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