Suppose that both companies experience a 40 percent increase in revenues. Compute the percentage change in profits for each company.

Operating Leverage Income statements for two different companies in the same industry are as follows: Trimax, Inc.Quintex, Inc. $320,000 160,000 $160,000 120,000 $40,000 $400,000 80,000 $320,000 280,000 $40,000 Sales Less: Variable costs Contribution margin Less: Fixed costs Operating income Required: 1. Compute the degree of operating leverage for each company Trimax Quintex 2. Compute the break-even point in dollars for each company Trimax, Inc. Quintex, Inc. Why is the break-even point for Quintex, Inc., higher? Because it must cover more in fixed expenses. 3. Suppose that both companies experience a 40 percent increase in revenues. Compute the percentage change in profits for each company Trimax Quintex 4 8 240,000 350,000V 50| X % 20 %