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    Degree of operating leverage

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    The income statement for Ellwell is as follows:

    Sales (10,000 units) $80,000
    Less variable costs -$48,000
    Contribution margin $32,000
    Less fixed costs -$24,000
    Net income $8,000

    If sales increase by 1,000 units, profits will:
    increase by $800.
    increase by $3,200.
    increase by $4,800.
    increase by $8,000

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    https://brainmass.com/business/accounting/degree-operating-leverage-232074

    Solution Preview

    Sales (10,000 units) $80,000
    Less variable costs -$48,000
    Contribution margin $32,000
    Less fixed costs -$24,000
    Net income ...

    Solution Summary

    Calculates degree of operating leverage to determine the change in profits when sales increase.

    $2.19

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