Fred and Bob own a medium size water delivery firm named W Corp. and they are each 50% partners. They have a 10,000 square foot factory with rent of 12k per month. They currently lease 3 trucks at $850 each per month and have 3 salaried employees they pay 25k each annually to operate their trucking routes. Sales are 800k per year, Contribution Margin is 500k per year and EBIT is 250k. They have no debt.

A. What is their DOL?

B. How can the DOL be lowered?

C. What will most likely happen to the firm if sales drop by half in regards to DOL and chapter 11 risk