Question

If sales increase by 15% and the degree of operating leverage is 6, net operating income should increase by [blank]
% (Enter your answer as a whole number.)

Answer 1

To find the percentage increase in net operating income (NOI) based on the increase in sales and the degree of operating leverage (DOL), we can use the following formula:

\[
\text{Percentage Increase in NOI} = \text{DOL} \times \text{Percentage Increase in Sales}
\]

Given:
- Percentage Increase in Sales = 15% = 0.15 (as a decimal)
- Degree of Operating Leverage (DOL) = 6

Now, plug in the values:

\[
\text{Percentage Increase in NOI} = 6 \times 0.15 = 0.90
\]

To express this as a percentage, convert it back to a whole number:

\[
\text{Percentage Increase in NOI} = 0.90 \times 100 = 90\%
\]

Thus, net operating income should increase by **90**%.