Break-Even Sales, Operating Leverage, Change in Income

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

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

Required:

1. Compute the degree of operating leverage for each company.

Duncan
Macduff

2. Conceptual Connection: Compute the break-even point for each company. Round to the nearest dollar.

Duncan	$
Macduff	$

3. Conceptual Connection: Suppose that both companies experience a 30% increase in revenues. Compute the percentage change in profits for each company.

Duncan	%
Macduff	%