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Concord Corporation has sales of $2000000, variable costs of $1000000, and fixed costs of $800000. Concord's degree of operating leverage is 5.00.1.091.00.1.25. A company can
Concord Corporation has sales of $2000000, variable costs of $1000000, and fixed costs of $800000. Concord's degree of operating leverage is 5.00.1.091.00.1.25. A company can sell all the units it can produce of either Product A or Product B but not both. Product A has a unit contribution margin of $18 and takes two machine hours to make and Product B has a unit contribution margin of $36.0 and takes three machine hours to make. If there are 5000 machine hours available to manufacture a product, income will be $15000 less if Product B is made. the same if either product is made. $15000 less if Product A is made. $15000 more if Product A is made. Sheridan Company's degree of operating leverage is 1.5. Warren Corporation's degree of operating leverage is 1.5. Warren's earnings would go up (or down) by as much as Sheridan's with an equal increase (or decrease) in sales. 3.0 times 1.0 times 0.5 0.0 times
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