U.S. Steal has the following income statement data:
Units Sold Total Variable Costs Fixed Costs Total Costs Total Revenue Operating Income (Loss)
25,000 $ 75,000 $ 30,000 $ 105,000 $ 175,000 $ 70,000
45,000 135,000 30,000 165,000 315,000 150,000
The top row of the table has the beginning values and the bottom row of the table has the ending values.
a. Compute the degree of operating leverage (DOL) based on the formula below. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) DOL = Percent change in operating income / Percent change in units sold
Degree of operating leverage_________________________
b. Recompute DOL using the formula given below. There may be a slight difference due to rounding. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
DOL = Q(P − VC) / Q(P − VC) − FC
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.
Degree of operating leverage_________________________