Income statements for two different companies in the same industry are as follows:

Required:
1. Compute the degree of operating leverage for each company.
2. Compute the break-even point for each company. Explain why the break-even point for Macduff is higher.
3. Suppose that both companies experience a 30 percent increase in revenues. Compute the percentage change in profits for each company. Explain why the percentage increase in Macduff€™s profits is so much larger than that of Duncan.

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Macduff $375,000 150,000 $225,000 200,000 25,000 Duncan Sales Total variable cost $375,000 300,000 75,000 50,000 25,000 Contribution margin Total fixed cost Operating income