E-6

U.S. Steal has the following income statement data:

Units Sold	Total Variable Costs	Fixed Costs	Total Costs	Total Revenue	Operating Income (Loss)
115,000	$	460,000		$	100,000		$	560,000		$	690,000		$	130,000
135,000		540,000			100,000			640,000			810,000			170,000

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 yourfinal answer to 2 decimal places.)

DOL	=	Percent change in operating income
Percent change in units sold

b.Recompute DOL using the formula given below. There may be a slight difference due to rounding.(Do not round intermediate calculations. Round yourfinal answer to 2 decimal places.)

DOL	=	Q(P VC)
Q(P VC) FC

Qrepresents beginning units sold (all calculations should be done at this level). Pcan be found by dividing total revenue by units sold. VC can be found by dividing total variable costs by units sold.