Degree of operating leverage—Graphical Levin Corporation has fixed operating costs of $72,000, variable operating costs of $6.75 per unit, and a selling price of $9.75 per unit.
a. Calculate the operating breakeven point in units.
b. Compute the degree of operating leverage (DOL) using the following unit sales levels as a base: 25,000, 30,000, 40,000. Use the formula given in the chapter.
c. Graph the DOL figures that you computed in part b (on the y axis) against base sales levels (on the x axis).
d. Compute the degree of operating leverage at 24,000 units; add this point to your graph.
e. What principle do your graph and figures illustrate?