E6.14 Compute degree of operating leverage and evaluate impact of alternative cost structures on net income. (LO 4), AN The CVP income statements shown below are available for Armstrong Company and Contador Company Armstrong Co. Contador Co. Sales $500,000 $500,000 240.000 50.000 Variable costs Contribution margin Fixed costs 260,000 450,000 160,000 350,000 Net income $100,000 $100.000 Instructions a. Compute the degree of operating leverage for each company and interpret your results. b. Assuming that sales revenue increases by 10%, prepare a variable costing income statement for each company e. Discuss how the cost structure of these two companies affects their operating leverage and profitability