How it works
Operating leverage = contribution margin / operating profit = (sales−variable costs)/(sales−variable costs−fixed costs).
Input definitions
- Sales for the period
- Enter the value in the labeled unit.
- Total variable costs
- Enter the value in the labeled unit.
- Fixed operating costs
- Enter the value in the labeled unit.
A worked example
- Sales for the period
- 100000
- Total variable costs
- 60000
- Fixed operating costs
- 20000
Assumptions & limits
Uses the accounting classifications, periods and policies you enter. Illustrative management-accounting model; it is not an audited statement, filing or determination of local accounting or tax compliance.
Sources & review
Maintained by AnsRio. Methods and examples use automated checks; this does not imply independent professional certification.
Method updated 2026-10-18. Content checked against the stated method and examples. Our verification approach.
Common questions
Does this predict profit at any sales level?
No. It is a local sensitivity measure assuming constant unit contribution and fixed costs near the entered operating point.
How does Degree of operating leverage work?
Operating leverage = contribution margin / operating profit = (sales−variable costs)/(sales−variable costs−fixed costs).
What should I check before using Degree of operating leverage?
Uses the accounting classifications, periods and policies you enter. Illustrative management-accounting model; it is not an audited statement, filing or determination of local accounting or tax compliance.