Eric is analyzing the potential impact of an improving economy on earnings at XYZ Corporation. He projects that sales will improve by 10 percent due to increased demand for cars. He wants to see how XYZs earnings might respond given that level of increase in sales. He first looks at the degree of leverage at XYZ, starting with operating leverage. XYZ sold 6 million passenger cars in 2019. The average price per car was 28,000, fixed costs associated with passenger car production total 20 billion per year, and variable costs per car are 18,000.

What is the degree of operating leverage of XYZ?

Group of answer choices

1.50

1.33

none of the above

2.00

1.66