Can you explain the correct approach to solve this general accounting question?

Two production methods are being evaluated for a new product. Consider the following cost structure for the labor-intensive method: Selling price per unit: $28 Direct materials per unit: $4 Direct labor per unit: $12 Variable overhead per unit: $3 Annual fixed manufacturing overhead: $600,000 Annual selling costs: Fixed = $400,000; Variable = $1.50 per unit At a production and sales volume of 200,000 units, compute the degree of operating leverage. Round your answer to two decimal places