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The following sales and cost data (000s) are for two companies in the transportation industry: Company A Company B Amount Percent of Sales Amount Percent

The following sales and cost data (000s) are for two companies in the transportation industry:

Company A

Company B

Amount Percent of Sales Amount Percent of Sales
Sales $ 240,000 100 % $ 240,000 100 %
Variable costs 120,000 50 72,000 30

Contribution margin $ 120,000 50 % $ 168,000 70 %
Fixed costs 21,600 62,600

Operating profit $ 98,400 $ 105,400

Required:
1-a.

Calculate the degree of operating leverage (DOL) for each company. (Round your answers to 3 decimal places.) For company A and B.

1-b. If sales increase from the present level, which company benefits more?
Company A

Company B

2.

Assume that sales rise 10% in the next year but that everything else remains constant. Calculate the percentage increase in profit for each company. (Do not round intermediate calculations. Input your answers as whole percentages rounded to two decimal places (i.e., .1567 = 15.67%))

Company A % Company B%

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