Question:
U.S. Steal has the following income statement data:
Total Operating
Units Variable Fixes Total Total Income
sold costs Costs Costs Revenue Losss
40,000 80,000 80,000 130,000 160,000 30,000
60,000 120,000 50,000 170,000 240,000 70,000
a. Compute DOL based on the formula below (see page 128 for an example):
Dol= Percent change in operating income
Percent change in units sold
b. Confirm that your answer to part a is correct by recomputing DOL There may be a slight difference due to rounding.
DOL = Q(P-VC)
q(P-VC)-PC
Q represents beginning units sold (all calculations should be done at this level). P can be found by dividing total revenue by units sold. VC can be found by dividing total variable costs by units sold.