Iverson Corporation's variable expenses are 60% of sales.At a $400,000 sales level, the degree of operating leverage is 5.If sales increase by $40,000, the new degree of operating leverage will be (rounded) :

A) 3.67
B) 2.86
C) 5.25
D) 5.00

Degree Of Operating Leverage

A measure, at a given level of sales, of how a percentage change in sales will affect profits. The degree of operating leverage is computed by dividing contribution margin by net operating income.

Variable Expenses

Costs that vary in direct proportion to changes in an activity level or volume, such as sales commissions.

Sales Increase

The rise in the volume or amount of sales or revenue a company achieves in a specific period compared to a previous period.