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Problem 5-15 (Static) Use of different formulas for operating leverage [LO5-3] U.S. Steal has the following income statement data: Units Sold 60,000 80,000 Total
Problem 5-15 (Static) Use of different formulas for operating leverage [LO5-3] U.S. Steal has the following income statement data: Units Sold 60,000 80,000 Total Variable Costs $ 120,000 160,000 Operating Fixed Costs $ 50,000 50,000 Total Costs $ 170,000 210,000 Total Revenue Income (Loss) $ 360,000 480,000 $ 190,000 270,000 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. 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 Degree of operating leverage b. 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(P - 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. Degree of operating leverage
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