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Friendly Company's financial statement for the last month is below. Sales $150,000 Less: Variable Costs 30,000 Contribution Margin 120,000 Less: Fixed Costs 90,000 Operating Income
Friendly Company's financial statement for the last month is below. Sales $150,000 Less: Variable Costs 30,000 Contribution Margin 120,000 Less: Fixed Costs 90,000 Operating Income $30,000 Required: 1. Calculate the company's Degree of Operating Leverage. (2 marks) 2. Using the Degree of Operating Leverage that you have calculated for part 1, calculate an estimate of a new Ne Operating Income, if sales increase by 25%. (3 marks) 3. Given the solutions above, comment on this company ifts industry has an average DOL of 6.0. (2 Marks)
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