The following CVP income statements are available for Chantal Corp. and Mantle, Inc.

Chantal Corp. Mantle, Inc.

Sales revenue $700,000 $700,000

Variable costs 350,000 210,000

Contribution margin 350,000 490,000

Fixed costs 225,000 365,000

Net income $125,000 $125,000

Instructions

(a) Compute the degree of operating leverage for each company.

(b) Assume that sales revenue decreases by 20%. Prepare a CVP income statement for each company.