1. Calculate the Operating Leverage for each of the two firms: A and B from the following information: Firm A has Sales Price Per Unit of Rs 20, Variable Cost Per Unit of Rs 6 and Fixed Operating Cost of Rs 50000. Firm B has Sales Price Per Unit of Rs 32, Variable Cost Per Unit of Rs 16 and Fixed Operating Cost of Rs 40000.

2 What conclusions can you draw with respect to levels of fixed cost and the degree of Operating Leverage values? Explain.

Assume number of units sold is Rs. 5000.

(2 Marks for Interpretation)

need good interpretation