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The sales and cost data for two companies in the transportation industry are as follows:

X Company Y Company
Amount Percent Amount Percent
Sales $ 150,000 100.00 $ 150,000 100.00
Variable costs 90,000 60.00 45,000 30.00
Contribution margin 60,000 40.00 105,000 70.00
Fixed costs 34,200 70,250
Operating income (πB) $ 25,800 $ 34,750

X Company's degree of operating leverage (DOL) at the current sales volume level is calculated to be:

Multiple Choice

2.33

3.00

5.00

4.00

1.00

Respuesta :

The correct option for X Company's degree of operating leverage (DOL) at the current sales volume level is calculated to be is A. 2.33

For X-Company :

Degree of operating leverage =  Contribution ÷ EBIT i.e., operating income

= 60000 ÷ 25800

= 2.33 times

Operating leverage is a fee-accounting method that measures the degree to which a company or assignment can boom operating profits by way of growing revenue. An enterprise that generates sales with an excessive gross margin and occasional variable charges has high operating leverage.

Generally speaking, high operating leverage is better than low operating leverage, because it permits groups to earn large profits on each incremental sale. Having said that, groups with a low degree of operating leverage may also discover it simpler to earn a profit when dealing with a decreased level of income.

Learn more about operating leverage here https://brainly.com/question/26978903

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