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Calculate the degree of operating leverage at sales

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Reference no: EM132254992

Question - Bernard Windows is a small company that installs windows. Its cost structure is as follows:

Selling price from each window installation $500

Variable cost of each window installation $400

Annual fixed costs $150,000

Number of window units sold 2,500

Bernard is considering changing its sales compensation for next year. Bernard would pay salespeople a 5% commission next year and reduce fixed selling costs by $62,500. Calculate the degree of operating leverage at sales of 2,500 units under the two options. Comment briefly on the result.

Reference no: EM132254992

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