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Company A is a manufacturer with current sales of $3,400,000 and a 60% contribution margin. Its fixed costs equal $1,500,000. Company B is a consulting
Company A is a manufacturer with current sales of $3,400,000 and a 60% contribution margin. Its fixed costs equal $1,500,000. Company B is a consulting firm with current service revenues of $3,300,000 and a 25% contribution margin. Its fixed costs equal $310,000. Compute the degree of operating leverage (DOL) for each company. Contribution Margin Income Statement Company A Company B Degree of Operating Leverage Numerator Denominator Choose: Ratio Degree of Operating Leverage Company A Company B Identify which company benefits more from a 20% increase in sales. Company A Company B
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