U.S. Steal has the following income statement data:Units SoldTotal Variable CostsFixed CostsTotal CostsTotal RevenueOperating Income (Loss)80,000$ 160,000$ 70,000$ 230,000$ 400,000$ 170,000100,000200,00070,000270,000500,000230,000The top row of the table has the beginning values and the bottom row of the table has the ending values.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 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(P − VC) / Q(P − VC) − FCQ 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.

DOL quantifies how a change in sales affects net income. After reaching a break-even point, a firm…

Answered: U.S. Steal has the following income…

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter10: Forecasting Financial Statement

Section: Chapter Questions

Problem 12PC

Related questions

Question

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

Units Sold	Total Variable Costs	Fixed Costs	Total Costs	Total Revenue	Operating Income (Loss)
80,000	$ 160,000	$ 70,000	$ 230,000	$ 400,000	$ 170,000
100,000	200,000	70,000	270,000	500,000	230,000

The top row of the table has the beginning values and the bottom row of the table has the ending values.

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
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(P − VC) / 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.