Q.4. Compute the degree of operating leverage, degree of financial leverage and degree of combined leverage.
Degree of operating leverage = Sales revenue - total variable cost / sales revenue - total cost
Sales Revenue = 36000 X 10 = 3, 60,000
Total Variable cost = 36000 X 6 = 2, 16,000
Total cost = 2, 16,000 + 50,000 = 2, 66,000
Operating Leverage = 3, 60,000 – 2, 16,000 / 3, 60,000 – 2, 66,000
= 1,44,000 / 94,000 = 1.53
Degree of Financial Leverage:
= 195/-31 = -6.2
Degree of Combined Leverage:
= 195/ 83 = 2.34
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