Operating Leverage Calculator
Estimate the sensitivity of operating profit to a small change in sales at your current cost structure.
Degree of operating leverageExample2×
- Current operating profit
- $20,000
- Scenario operating profit
- $24,000
How to calculate operating leverage
Degree of operating leverage = (sales − variable costs) ÷ operating profit
Assumes unchanged prices, sales mix and variable cost ratio within the relevant capacity range. Requires positive operating profit.
Worked example
An illustrative scenario. “Reset to example” restores it in the calculator.
- Sales
- $100,000
- Total variable costs
- $60,000
- Fixed operating costs
- $20,000
- Sales change scenario
- 10%
Degree of operating leverage: 2×
Operating Leverage FAQ
Why is the ratio unstable near break-even?
Operating profit is the denominator. A small profit produces a large ratio, so minor sales changes can have a large percentage effect.