Windows is a small company that installs windows. Its cost structure

is asfollows:

Selling price from each window installation

$900

Variable cost of each window installation

$850

Annual fixed costs

$165,000

Number of window units sold

6,900

Target operating income

$180,000

Templeton is considering changing its sales compensation for next year. Templeton would pay salespeople a 2% commission next year and reduce fixed selling costs by 64,500

Calculate the degree of operating leverage at sales of 6,900 units under the two options. Comment briefly on the result.

Begin by selecting the labels for the degree of operating leverage formula.

Degree of

/

=

operating leverage