FINC600

Suppose that the expected variable costs of Otobai’s project are ¥33 billion a year and that fixed costs are zero. How does this change the degree of operating leverage (DOL)? Now recompute the operating leverage assuming that the entire ¥33 billion of costs are fixed.
DOL Formula Project Costs Calculation
Variable cost 1+(Fixed cost + depreciation)/ operating profit F C

Fixed cost 1+(Fixed cost + depreciation)/ operating profit F C