Operating Leverage Income statements for two different companies in the same industry are as follows: Elgin, Inc. Hobart, Inc. Sales $1,000,000 $1,125,000 Less: Variable costs 800,000 675,000 Contribution margin $200,000 $450,000 Less: Fixed costs 150,000 400,000 Operating income $50,000 $50,000 Required: 1. Compute the degree of operating leverage for each company. Elgin X Hobart X 2. Compute the break-even point in dollars for each company. Elgin, Inc. Hobart, Inc. Why is the break-even point for Hobart, Inc., higher? Because it must cover more in fixed expenses. 3. Suppose that both companies experience a 50 percent increase in revenues. Compute the percentage change in profits for each company. Elgin % Hobart %