The Formula for Determining the Degree of Operating Leverage Is $\div$

question 5

True/False

The formula for determining the degree of operating leverage is:
DOL = [Q (P - V)] $\div$ [Q (P - V) - F_C]
The variables have the following meanings and values:
$\begin{array}{lll}\mathrm{P} & =\text { Price per unit } & =\$ 20.00 \\\mathrm{~V} & =\text { Variable cost per unit } & =\$ 16.00 \\\mathrm{Q} & \text { = Monthly quantity sold }& =5,000\\\mathrm{FC}&=\text { Total anmual fixed costs }&=\$180,000\end{array}$ A 5% increase in the firm's sales will lead to a 20% increase in its EBIT.

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