Company A has current sales of $10,000,000 and a 45% contribution margin. Its fixed costs are $3,000,000.
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Company A has current sales of $10,000,000 and a 45% contribution margin. Its fixed costs are $3,000,000. Company B is a service firm with current service revenue of $5,000,000 and a 20% contribution margin. Company B’s fixed costs are $500,000. Compute the degree of operating leverage for both companies. Which company will benefit most from a 25% increase in sales? Explain why.
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Related Book For
Principles Of Accounting Volume 2 Managerial Accounting
ISBN: 9780357364802
1st Edition
Authors: OpenStax
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