The following sales and cost data (in thousands) are for two companies in the transportation industry Company A Company B Amount Percent of Sales Amount Percent of Sales Sales $ 100,000 100 $ 100,000 100 Variable costs 50,000 50 30,000 30 Contribution margin $ 50,000 50 $ 70,000 70 Fixed costs 15,000 40,000 Operating profit $ 35,000 $ 30,000 Required 1 a Calculate the degree of operating leverage (DOL) for each company 1 b If sales increase from the present level, which company benefits more 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 1 a Calculate the degree of operating leverage (DOL) for each company 1 b If sales increase from the present level, which company benefits more 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 Complete this question by entering your answers in the tabs below Assume that sales rise 10 in the next year but that everything else remains constant Calculate the percentage increase in profit for each company (Input your answers as percentages rounded to 2 decimal places (i e , 0 1567 15 67 ) )

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 18, 2024

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

The following sales and cost data (in thousands) are for two companies in the transportation industry: Company A Company B Amount Percent of Sales Amount Percent of Sales Sales $ 100,000 100% $ 100,000 100% Variable costs 50,000 50 30,000 30 Contribution margin $ 50,000 50% $ 70,000 70% Fixed costs 15,000 40,000 Operating profit $ 35,000 $ 30,000 Required: 1-a. Calculate the degree of operating leverage (DOL) for each company. 1-b. If sales increase from the present level, which company benefits more? 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. image text in transcribed

1-a. Calculate the degree of operating leverage (DOL) for each company. 1-b. If sales increase from the present level, which company benefits more? 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. Complete this question by entering your answers in the tabs below. Assume that sales rise 10% in the next year but that everything else remains constant. Calculate the percentage increase in profit for each company. (Input your answers as percentages rounded to 2 decimal places (i.e., 0.1567=15.67% ).)