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• Degree of operating leverage = 1.36, Degree of financial leverage = 1.25
Financial Leverage = EBIT / EBIT - interest -> 15000/12000 = 1.25; Operating Leverage = Sales - TVC / Sales - TVC - FC = 150000 - 105000 / 150000 - 105000 - 12000 = 1.36
• That's correct!
• Degree of operating leverage = 1.36, Degree of financial leverage = 1.25
Woo! I got it right. • Degree of operating leverage = 1.36, Degree of financial leverage = 1.25
Too bad the 300 hours practice question #38 correct answer choice is displayed as "(B) Degree of operating leverage = 1.36, Degree of financial leverage = 1.57 ✔" even though the Degree of financial leverage is clearly 1.25...
• Hi @rogersp188

So sorry for the mixup! We were in the middle of modifying the question.

Since EBIT is also generally = Revenue - Fixed Costs - Variable Costs, we wanted to make sure the EBIT number matched accordingly. Hence the question and answers have been modified slightly from @exam_whiz's original version.

In our modified version:
EBIT
= Rev - FC - VC
= (15,000 x \$10) - \$12,000 - (15,000 x \$7)
= \$33,000

The question should be fully fixed now. So sorry again for the mixup!
• Degree of operating leverage = 1.36, Degree of financial leverage = 1.25
as financial leverage= EBIT/(EBIT-Interest)   and Operating Leverage=Sales-FC/ EBIT