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The following sales and cost data (in thousands) are for two companies in the transportation industry: Sales Variable costs Contribution margin Fixed costs Operating profit
The following sales and cost data (in thousands) are for two companies in the transportation industry: Sales Variable costs Contribution margin Fixed costs Operating profit Company A Percent of Amount Sales $300,000 100% 150,000 50 $150,000 50% 16,500 $133,500 Company B Percent of Amount Sales $300,000 100% 90,000 30 $210,000 70% 73,500 $136,500 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 20% in the next year but that everything else remains constant. Calculate the percentage increase in profit for each company
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