Sales in North Corporation increased from $80,000 per year to $84,000 per year while net operating income increased from $30,000 to $36,000. Given this data, the company's degree of operating leverage must have been:

4 times

Explanation:

Given that,

Initial sales = $80,000

New sales = $84,000

Initial net operating income = $30,000

New net operating income = $36,000

The degree of operating leverage is determined by dividing the percentage change in net operating income by the percentage change in the sales.

Percentage change in net operating income:

= [ (New net operating income - Initial net operating income) : Initial net operating income] * 100

= [ ($36,000 - $30,000) : $30,000] * 100

= ($6,000 : $30,000) * 100

= 0.2 * 100

= 20%

Percentage change in sales:

= [ (New sales - Initial sales) : Initial sales] * 100

= [ ($84,000 - $80,000) : $80,000] * 100

= ($4,000 : $80,000) * 100

= 0.05 * 100

= 5%

Degree of operating leverage:

= Percentage change in net operating income : Percentage change in sales

= 20 : 5

= 4 times