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Question - ABC Company manufactures computer monitors. Following is a summary of its basic cost and revenue data:
Per Unit
Percent
Sales price
$ 580
100
Variable costs
348
60
contribution margin
$ 232
40
Assume that ABC Company is currently selling 700 computer monitors per month. Fixed costs are expected to be $96,000.
Required -
1. Calculate ABC Company's degree of operating leverage (DOL) if 700 units are sold.
2. Define what is meant by the DOL.
3. Of what purpose/value is the DOL to decision makers?
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