. For sale at 20,000 units, company’s DOL is 5. If the sales increase by 27%, how much EBIT will increase?*2 points120%125%130%135%

The Degree of Operating Leverage (DOL) is a measure of how a percentage change in sales will affect profits. It is calculated as follows:

DOL = % Change in EBIT (Earnings Before Interest and Taxes) / % Change in Sales

In this case, the DOL is given as 5. This means that for every 1% increase in sales, EBIT will increase by 5%.

If sales increase by 27%, we can calculate the increase in EBIT as follows:

% Change in EBIT = DOL * % Change in Sales % Change in EBIT = 5 * 27% % Change in EBIT = 135%

Therefore, if sales increase by 27%, EBIT will increase by 135%. So, the correct answer is 135%.