This video provides an example of how to calculate the Degree of Operating Leverage.

The Degree of Operating Leverage is equal to the total Contribution Margin divided by the Operating Profit. The Degree of Operating Leverage is a number that tells you the amount by which Operating Profit if Sales Revenue were to increase. For example, if the Degree of Operating Leverage is 8, this means a 20% increase in Sales Revenue would result in a 160% increase (8 * 20%) in Operating Profit.

The Degree of Operating Leverage is not a constant; it differs based on the level of sales. The Degree of Operating Leverage is highest near the break-even point.