Bennet is considering changing its sales compensation for next year.

Bennett would pay salespeople a 2% commission next year and reduce fixed selling costs by $66,500.

Calculate the degree of operating leverage at sales of 5,900 units under the two options. Comment briefly on the result.

Begin by selecting the labels for the degree of operating leverage formula.

				Degree of
	/		=	operating leverage

Next, complete the following table in order to calculate the degree of operating leverage. (Round the degree of operating leverage to two decimal places.)

	Option 1	Option 2
	No Commission	2% Commission
Selling price

Variable cost

Contribution margin per unit

Contribution margin

Fixed costs

Operating income

Degree of operating leverage

Comment briefly on the result. (Enter the amounts to two decimal places.)

These results indicate that, when sales are 2,500 units, a 1% change in sales and contribution margin will result in a
	% change in operating income for Option 1. For Option 2, a 1% change in sales and contribution margin will result in a
	% change in operating income.