Problem 5-15 (Algo) Use of different formulas for operating leverage [LO5-3]

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

Units SoldTotal Variable CostsFixed CostsTotal CostsTotal RevenueOperating Income (Loss)65,000$ 195,000$ 40,000$ 235,000$ 325,000$ 90,00085,000255,00040,000295,000425,000130,000

The top row of the table has the beginning values and the bottom row of the table has the ending values.

1. Compute the degree of operating leverage (DOL) based on the formula below.

Note: Do not round intermediate calculations. Round your final answer to 2 decimal places.

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

1. Recompute DOL using the formula given below. There may be a slight difference due to rounding.

Note: Do not round intermediate calculations. Round your final answer to 2 decimal places.

DOL=Q(PVC)[Q(PVC)FC]DOL=-VC[-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.