Operating Leverage Calculator
Calculate the Degree of Operating Leverage (DOL) and analyze how sales changes impact operating income.
Financial Data
$500,000
$10,000$5,000,000
$300,000
$0$5,000,000
$100,000
$0$1,000,000
10%
-50%50%
Degree of Operating Leverage (DOL)
2.00x
A 10% change in sales = 20.0% change in EBIT
Contribution Margin
$200,000
40.0% ratio
Operating Income (EBIT)
$100,000
Break-Even Revenue
$250,000
Margin of Safety
50.0%
What-If: 10% Revenue Change
New Revenue$550,000
New Operating Income$120,000
EBIT Change+20.0%
Cost Structure
Variable Costs60.0%
Fixed Costs20.0%
Operating Leverage Formula
DOL = Contribution Margin / Operating Income = (Revenue - Variable Costs) / EBIT
High Operating Leverage
High fixed costs relative to variable costs. Profits are more sensitive to sales changes - higher risk but higher potential reward.
Interpretation
DOL of 3x means a 10% increase in sales leads to 30% increase in operating income. Works both ways for increases and decreases.