Calculating Degree of Operating Leverage

ABC Manufacturing Company has fixed costs of $500,000 and variable costs of $15 per unit produced. The selling price per unit is $30. Calculate the degree of operating leverage (DOL) at a production level of 20,000 units.

The degree of operating leverage is a key measure that indicates a company's fixed versus variable costs and how this structure affects its profitability. DOL can help to analyze the sensitivity of a company's operating income to changes in sales volume.