CA Inter P6 · Chapter 6 · Question 8 of 9
Nandini Ltd has a contribution of ₹ 20,00,000 and a degree of operating leverage of 2.5. Its fixed operating costs are:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) ₹ 12,00,000
Explanation
DOL = contribution / EBIT, so EBIT = ₹ 20,00,000 / 2.5 = ₹ 8,00,000. Fixed costs = contribution - EBIT = ₹ 20,00,000 - ₹ 8,00,000 = ₹ 12,00,000. The figure ₹ 8,00,000 is EBIT.
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