I understand why DOL is percentage change of EBIT / percentage change in unit volume. But how is it that Incremental Contribution Margin / Incremental EBIT margin “magically” gets you to the same place?
This is a perfect example that working out what the equations actually consist of, by breaking them down as far as possible, will allow you to understand alot more than just memorizing a formula…think of this too, if the unit volume goes up by 1, is the percentage change in EBIT the same as that units incremental cont.margin? You can get this.