Rashbash2064 Rashbash2064

26-02-2020
Business

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The degree of operating leverage at a specific level of sales helps the managers calculate the effect that potential changes in sales will have on operating income. true or false

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Parrain Parrain

29-02-2020

Answer: TRUE

Explanation:

The DEGREE OF OPERATING LEVERAGE (DOL) is a ratio that measure just how much operating income will change if there is a change in sales.

The formula is the % change in EARNINGS BEFORE TAX/ % change in SALES.

This measure therefore assists analysts in estimating the impact of any change in sales in a company.

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