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Company A is a manufacturer with sales of $3,100,000 and a 60% contribution margin. Its fixed costs equal $1,390,000. Company B is a consulting firm
Company A is a manufacturer with sales of $3,100,000 and a 60% contribution margin. Its fixed costs equal $1,390,000. Company B is a consulting firm with service revenues of $3,200,000 and a 20% contribution margin. Its fixed costs equal $150,000. Compute the degree of operating leverage (DOL) for each company. Which company benefits more from a 20% increase in sales. Complete this question by entering your answers in the tabs below. DOL Company Benefits Compute the degree of operating leverage (DOL) for each company. Contribution Margin Income Statement Company A 3,100,000 Company B 3,200,000 Sales Variable costs Contribution margin Fixed costs Pretax income 1,390,000 150,000 Degree of Operating Leverage Denominator Choose: Numerator Ratio Degree of Operating Leverage Contribution margin Company x Company x DOL Company Benefits >
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