1. Alvarez Technologies has sales of $3,000,000. The companys fixed operating costs total $500,000 and its variable costs equal 60 percent of sales, so the companys current operating income is $700,000. The companys interest expense is $500,000. What is the companys degree of total operating leverage?

1. 1.714
2. 3.100
3. 3.250
4. 3.500

2. Alvarez Technologies has sales of $3,000,000. The companys fixed operating costs total $500,000 and its variable costs equal 60 percent of sales, so the companys current operating income is $700,000. The companys interest expense is $500,000. What is the companys degree financial leverage?

1. 1.714
2. 3.100
3. 3.250
4. 3.500