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what is the formula of operating leverage. The formula of Degree of Operating Leverage DOL is derived by dividing the percentage change in the EBIT by the percentage change in the sales and it is represented as Formula Percentage change in EBIT Percentage change in sales. In practice we tend to use the second formula.
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The contribution margin is sales minus variable expenses. The formula of Degree of Operating Leverage DOL is derived by dividing the percentage change in the EBIT by the percentage change in the sales and it is represented as Formula Percentage change in EBIT Percentage change in sales. Change in operating income.
Degree of operating leverage Q C M Q C M Fixed operating costs where.
Operating Leverage Quantity x Price Variable Cost Per Unit Quantity x Price Variable Cost Per Unit Fixed Operating Costs The operating leverage formula can also be expressed in a simpler manner. In practice we tend to use the second formula. Because we know that a low operating leverage presents lower fixed cost and higher variable cost. The contribution margin is sales minus variable expenses.
