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G H D CH 13 - Degree of Operating Leverage (DOL) Problem A partial analytical...

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G H D CH 13 - Degree of Operating Leverage (DOL) Problem A partial analytical income statement for Point Llama Farms is shown below. Sales 1,600,000 Less: Variable costs 850,000 Revenue Before Fixed Costs (CM) 750,000 Less: Fixed Costs 425,000 EBIT (.e. Operating Income or NON 325,000 Calculate the degree of operating leverage ( NOTE: An alternative formula for DOL = (Sales - Variable costs)/(EBIT)). b. If sales increase by 10%, what percentage would EBIT (NOI) increase Hint Dol tells you how much EBIT will increase/decrease given a change in Sales -1.e. the DOL multiplied by the change in sales pives you the change in EBIT? If sales decrease by 20%, what percentage would EBIT (NOI) decrease? a. c. a DOL b c

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