Reference no: EM131247594
Income statements for two different companies in the same industry are as follows:
Sales $ 500,000 $ 500,000
Less: Variable Costs 400,000 200,000
Contribution Margin 100,000 300,000
Less: Fixed Costs 50,000 250,000
Operating Income $ 50,000 $ 50,000
1. Calculate the degree of operating leverage for both companies.
2. Calculate the break-even point in $ for each company. Which company has the higher break-even point? Why?
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