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How to calculate Operating leverage

The Operating leverage formula, with plain worked examples you can check yourself.

Operating leverage = CM ÷ OI

The result is a number in ×.

Worked examples

CM = 200 · OI = 100Operating leverage = 2×
CM = 500 · OI = 200Operating leverage = 2.5×
CM = 600 · OI = 300Operating leverage = 2×

How to use it

  1. Write down the values for each letter in the formula.
  2. Do the brackets first, then divide or multiply.
  3. Check the units before you compare results.
  4. Compare the answer with last period or with a competitor to see if it is good or bad.

This formula belongs to Costs & Break-even.

Related terms

LeverageFixed costsVariable costsCost of goods soldOverheadDepreciation

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