15-13-1

Operating Leverage

15-13 Operating Leverage

Operating leverage lets you calculate the degree of change in net earnings arising from a change in sales amount.

Operating Leverage Fields

The following fields appear on the Operating Leverage calculation page.

Field

Description

SAL

Amount currently obtained from sales

VC

Variable cost for this level of production

FC

Fixed costs

DOL

Degree of operating leverage

kExample

What is the degree of operating leverage for a company with sales ([SAL]) of $1,200,000, variable costs ([VC]) of $600,000, and fixed costs ([FC]) of $200,000?

•You can also calculate sales amount ([SAL]), variable costs ([VC]), or fixed costs ([FC]) by inputting the other three values and tapping the button for the result you want.

Calculation Formulas

DOL =

SAL – VC

 

SAL – VC – FC

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