Answer:
The correct answer is A
Explanation:
DOL stands for Degree of operating leverage, which is a measure that is used to determine how the operating income of the company changes after the change in percentage in its sales.
The formula for computing the degree of operating leverage is as follows:
Degree of operating leverage = Contribution margin / Pre-tax net income
where
Contribution margin is $48,000
Pre- tax net income is $12,000
Putting the values above:
Degree of operating leverage = $48,000 / $12,000
Degree of operating leverage = 4.0
