ECONOMICS

Detailed explanation-1: -The operating leverage formula is calculated by multiplying the quantity by the difference between the price and the variable cost per unit divided by the product of quantity multiplied by the difference between the price and the variable cost per unit minus fixed operating costs.

Detailed explanation-2: -Formula for Degree of Operating Leverage Since the operating leverage ratio is closely related to the company’s cost structure, we can calculate it using the company’s contribution margin. The contribution margin is the difference between total sales and total variable costs.

Detailed explanation-3: -Fixed cost = Total cost of production-(Variable cost per unit x number of units produced)