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RST Company produces a product that has a selling price of $10 per unit and variable cost of $6 per unit. The company's fixed costs are $30,000. If the company sells 15,000 units, the degree of operating leverage is

Answer :

The e degree of operating leverage of RST Company given its price, costs and quantiy sold is 2.

What is the degree of operating leverage?

The degree of operating leverage (DOL) measures the sensitivity of a company's operating income to changes in the demand.

DOL = [Q(P - V) ] /[ Q(P - V) - F]

  • Q = quantity
  • P = price
  • V = variable cost
  • F = fixed cost

[15000(10 - 6)] / [15000(10 - 6) - $30,000]

60,000 / 30,000 = 2

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