Calculate firm degree of operating leverage

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Reference no: EM131993250

Two firms, A and B, both produce brushes. The price of brushes is $1.30 each. Firm A has total fixed costs of $450,200 and variable costs of 50 cents per brush. Firm B has total fixed costs of $260,000 and variable costs of 72 cents per brush. The corporate tax rate is 30%. If the economy is strong each firm will sell 1,502,000 brushes. If the economy enters a recession, each firm will sell 979,000 brushes. Calculate Firm A's degree of operating leverage.

Reference no: EM131993250

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