If q equals the units sold, p is the selling price per unit, v is the variable expense per unit, and f is the fixed expense, then the degree of operating leverage is equal to: a. q/(p-v). b. f/(p-v). c. f/[(p-v)/p]. d. [(p-v)q]/[(p-v)q-f].

The correct answer is: option D

Explanation:

The degree of operating leverage (DOL) is a measure used to evaluate how a company's operating income changes after a percentage change in its sales. A company's operating leverage involves fixed costs and variable costs. It is a financial ratio that measures the sensitivity of a company’s operating income to its sales. This financial metric shows how a change in the company’s sales will affect its operating income.

There are two main formulas to calculate the DOL:

DOL= Contribution Margin/ Operating Income

or

DOL= [Qx(P-V)] / [QX(P-V)-F)

Where:

Q: the number of units

P: the price per unit

V: the variable cost per unit

F: the fixed costs

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