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ATech has fixed costs of $9 million and profits of $4 million. Its competitor, ZTech, is roughly the same size and this year earned the
ATech has fixed costs of $9 million and profits of $4 million. Its competitor, ZTech, is roughly the same size and this year earned the same profits, $4 million. But it operates with higher fixed costs of $5 million and lower variable costs. a. What is the degree of operating leverage (DOL) for each company? (Defined here as 1 + Fixed costs/Profit.) (Do not round intermediate calculations. Round your answers to 2 decimal places.) Degree of operating leverage for ATech Degree of operating leverage for Tech b. Which firm has higher operating leverage? ZTech ATech c. Which firm will likely have higher profits if the economy strengthens? ZTech ATech
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