CFIN (with Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
5th Edition
ISBN: 9781305661653
Author: Scott Besley, Eugene Brigham
Publisher: Cengage Learning
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Chapter 12, Problem 10PROB
Summary Introduction
Degree of operating leverage (DOL):
It is the ratio of gross profit to net operating income.
Calculate the degree of operating leverage as follows:
Degree of financial leverage (DFL):
It is the ratio of net operating income to earnings before tax.
Calculate the degree of financial leverage as follows:
Degree of total leverage (DTL):
It is the ratio of gross profit to earnings before tax.
Calculate the degree of total leverage as follows:
By using the income statement calculate the degree of operating leverage, degree of financial leverage and degree of total leverage.
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Students have asked these similar questions
The statement of comprehensive income of Blanche Company for the current year is presented below (refer to the attached picture): What is the degree of operating leverage of Blanche Company?
sales 400,000
variable costs 125,000
contribution margin 275,000
fixed cost 200,000
income before tax 75,000
Below is the Income Statement of Babana Inc. for the current year:
Sales 18,000,000
Less: Cost of goods sold 8,400,000
Gross income 9,600,000
Gain on sale of equipment 300,000
Total income 9,900,000
Less: Operating expenses 1,500,000
Casualty loss 900,000
Income before tax 7,500,000
Less: Income tax 30% 2,250,000
Net income 5,250,000
Additional information:
Third quarter sales were 30% of total sales.
For interim reporting purposes, a gross profit of 40% can justified.
Variable operating expenses are allocated in the same proportion as sales.
Fixed operating expenses are allocated based on the expiration of time.
Of the total operating expenses, P1,200,000 relate to variable expenses and P300,000 relate to fixed expenses.
The equipment was sold on June 1.
The casualty loss occurred on September 1.
What amount should be reported as net income for the third quarter ended September 30?
A. 1,560,000B. 825,000C. 577,500D. 925,000
Melb Corporation reported the following data for its most recent year: sales, $570,000; variable expenses, $270,000; and fixed expenses, $240,000. The company's degree of operating leverage is closest to:
Chapter 12 Solutions
CFIN (with Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
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