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

UNITS SOLD: TOTAL VARIABLE COSTS: FIXED COSTS: TOTAL COSTS: TOTAL REV: OPERAT. INCOME (LOSS)

40,000 $80,000 $50,000 $130,000 $160,000 $30,000

60,000 $120,000 $50,000 $170,000 $240,000 $70,000

a. compute DOL based on the forumla below:

DOL = percentage change in operating income/percent change in units sold

b. confirm that your answer to part "a" is correct by recomputing DOL using:

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

* Q represents beginning units sold (all calculations should be done at the level).

P can be found by dividing total revenue by units sold.

VC can be found by dividing total variable costs by units sold.