Assume that the Samsung Corporation has $2 million in sales (S), with variable costs (VC) being equal to 70% of its sales, its fixed costs (F) are $100,000, and its annual long-term interest expense (I) is $50,000.Show all calculations.

Question 1: Determine Samsung's degree of operating leverage (DOL).

I figured out the DOL I need to find the DFL. I thought it would be 2,000,000 / (2,000,000 - 50,000). But it is WRONG! I need help setting it up.

S = 2,000,000

VC = .70 x 2,000,000

VC = 1,400,000

F = 100,000

DOL =

600,000 / 500,000 = 1.2

DOL = 1.2