{
  "id": "operating-leverage",
  "version": "430df52fb219",
  "status": "published",
  "name": "Operating Leverage Calculator",
  "question": "What is my operating leverage?",
  "summary": "Computes the degree of operating leverage (DOL): contribution margin divided by operating income, or the percent change in operating income over the percent change in sales.",
  "category": "finance",
  "subcategory": "business",
  "url": "https://www.acalculator.org/finance/operating-leverage-calculator",
  "markdown": "https://www.acalculator.org/finance/operating-leverage-calculator.md",
  "kind": "function",
  "method": "From sales and costs: contribution margin = sales − variable costs; operating income = contribution margin − fixed costs; DOL = contribution margin ÷ operating income; change in operating income = DOL × change in sales. From two periods: DOL = ((income after − income before) ÷ income before) ÷ ((sales after − sales before) ÷ sales before).",
  "assumptions": [
    "Variable costs change in proportion to sales and fixed costs stay the same, so DOL holds for changes from this sales level.",
    "Operating income is income before interest and income tax.",
    "Arithmetic is exact on the typed decimals; DOL shows to 2 decimals, percents to 2 decimals and money to the cent, halves up."
  ],
  "inputs": {
    "$schema": "https://json-schema.org/draft/2020-12/schema",
    "type": "object",
    "properties": {
      "from": {
        "title": "Start from",
        "description": "Sales and costs for one period, or sales and operating income for two periods.",
        "type": "string",
        "enum": [
          "costs",
          "periods"
        ]
      },
      "sales": {
        "title": "Sales",
        "description": "Sales revenue for the period. Must be above $0.",
        "type": "number",
        "x-unit": "USD",
        "exclusiveMinimum": 0,
        "maximum": 1000000000000000
      },
      "vc": {
        "title": "Variable costs",
        "description": "Costs that rise and fall with sales, such as materials and commissions.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000000000
      },
      "fc": {
        "title": "Fixed costs",
        "description": "Costs that stay the same as sales change, such as rent and salaries.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000000000
      },
      "chg": {
        "title": "Change in sales",
        "description": "A percent rise in sales (negative for a fall) to see what it does to operating income. Optional.",
        "type": "number",
        "x-unit": "percent",
        "minimum": -100,
        "maximum": 1000000
      },
      "s1": {
        "title": "Sales before",
        "description": "Sales in the earlier period.",
        "type": "number",
        "x-unit": "USD",
        "exclusiveMinimum": 0,
        "maximum": 1000000000000000
      },
      "s2": {
        "title": "Sales after",
        "description": "Sales in the later period.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000000000
      },
      "oi1": {
        "title": "Operating income before",
        "description": "Operating income in the earlier period. Must be above $0.",
        "type": "number",
        "x-unit": "USD",
        "exclusiveMinimum": 0,
        "maximum": 1000000000000000
      },
      "oi2": {
        "title": "Operating income after",
        "description": "Operating income in the later period. Negative for a loss.",
        "type": "number",
        "x-unit": "USD",
        "minimum": -1000000000000000,
        "maximum": 1000000000000000
      }
    }
  },
  "outputs": {
    "dol": {
      "label": "Degree of operating leverage (DOL)",
      "description": "Contribution margin ÷ operating income, or % change in operating income ÷ % change in sales.",
      "format": "number"
    },
    "contribution": {
      "label": "Contribution margin",
      "description": "Sales − variable costs.",
      "format": "money"
    },
    "income": {
      "label": "Operating income",
      "description": "Contribution margin − fixed costs.",
      "format": "money"
    },
    "incomeChange": {
      "label": "Change in operating income",
      "description": "DOL × the change in sales you entered.",
      "format": "percent"
    },
    "salesPct": {
      "label": "Change in sales",
      "description": "(Sales after − sales before) ÷ sales before × 100.",
      "format": "percent"
    },
    "incomePct": {
      "label": "Change in operating income",
      "description": "(Operating income after − before) ÷ operating income before × 100.",
      "format": "percent"
    }
  },
  "defaultAnswer": {
    "inputs": {
      "from": "costs",
      "sales": 250000,
      "vc": 102000,
      "fc": 63000,
      "chg": 10,
      "s1": 250000,
      "s2": 200000,
      "oi1": 85000,
      "oi2": 55400
    },
    "outputs": {
      "dol": 1.7411764705882353,
      "contribution": 148000,
      "income": 85000,
      "incomeChange": 17.41176470588235
    },
    "text": "The degree of operating leverage is 1.74: a 1% change in sales changes operating income by 1.74%."
  },
  "examples": [
    {
      "given": {
        "from": "costs",
        "sales": 250000,
        "vc": 102000,
        "fc": 63000,
        "chg": 10
      },
      "expect": {
        "dol": 1.7411764705882353,
        "contribution": 148000,
        "income": 85000,
        "incomeChange": 17.41176470588235
      },
      "source": "OpenStax, Principles of Managerial Accounting, 3.5 Calculate and Interpret a Company’s Margin of Safety and Operating Leverage (degree of operating leverage = contribution margin ÷ net operating income; DOL × percentage change in sales = percentage change in net operating income; Company A and Company B). https://openstax.org/books/principles-managerial-accounting/pages/3-5-calculate-and-interpret-a-companys-margin-of-safety-and-operating-leverage: 148,000 ÷ 85,000 = 1.74 (rounded); 1.74 × 10% = 17.4%; exact 148/85 and 296/17 (Python Fraction)"
    },
    {
      "given": {
        "from": "costs",
        "sales": 315000,
        "vc": 105000,
        "fc": 125000,
        "chg": 10
      },
      "expect": {
        "dol": 2.4705882352941178,
        "contribution": 210000,
        "income": 85000,
        "incomeChange": 24.705882352941178
      },
      "source": "OpenStax, Principles of Managerial Accounting, 3.5 Calculate and Interpret a Company’s Margin of Safety and Operating Leverage (degree of operating leverage = contribution margin ÷ net operating income; DOL × percentage change in sales = percentage change in net operating income; Company A and Company B). https://openstax.org/books/principles-managerial-accounting/pages/3-5-calculate-and-interpret-a-companys-margin-of-safety-and-operating-leverage: 210,000 ÷ 85,000 = 2.47 (rounded); 2.47 × 10% = 24.7%; exact 42/17 and 420/17 (Python Fraction)"
    },
    {
      "given": {
        "from": "periods",
        "s1": 250000,
        "s2": 200000,
        "oi1": 85000,
        "oi2": 55400
      },
      "expect": {
        "dol": 1.7411764705882353,
        "salesPct": -20,
        "incomePct": -34.8235294117647
      },
      "source": "OpenStax, Principles of Managerial Accounting, 3.5 Calculate and Interpret a Company’s Margin of Safety and Operating Leverage (degree of operating leverage = contribution margin ÷ net operating income; DOL × percentage change in sales = percentage change in net operating income; Company A and Company B). https://openstax.org/books/principles-managerial-accounting/pages/3-5-calculate-and-interpret-a-companys-margin-of-safety-and-operating-leverage (Company A: sales $200,000 and net income $55,400 after a 20% decrease, 34.8% less income); −34.82% ÷ −20% = 1.74"
    },
    {
      "given": {
        "from": "costs",
        "sales": 400000,
        "vc": 250000,
        "fc": 180000
      },
      "expect": {
        "dol": -5,
        "contribution": 150000,
        "income": -30000
      },
      "source": "OpenStax, Principles of Managerial Accounting, 3.5 Calculate and Interpret a Company’s Margin of Safety and Operating Leverage (degree of operating leverage = contribution margin ÷ net operating income; DOL × percentage change in sales = percentage change in net operating income; Company A and Company B). https://openstax.org/books/principles-managerial-accounting/pages/3-5-calculate-and-interpret-a-companys-margin-of-safety-and-operating-leverage (formula); hand calculation in content.mdx: 150,000 ÷ −30,000 = −5"
    }
  ],
  "sources": [
    "OpenStax, Principles of Managerial Accounting, 3.5 Calculate and Interpret a Company’s Margin of Safety and Operating Leverage: operating leverage measures how sensitive net operating income is to a percentage change in sales; degree of operating leverage = contribution margin ÷ net operating income; DOL × percentage change in sales = percentage change in net operating income; Company A (DOL 1.74) and Company B (DOL 2.47), and both after a 20% fall in sales. https://openstax.org/books/principles-managerial-accounting/pages/3-5-calculate-and-interpret-a-companys-margin-of-safety-and-operating-leverage (retrieved 2026-10-19)"
  ],
  "related": [
    "break-even",
    "variable-cost",
    "operating-income",
    "profit"
  ],
  "changelog": []
}