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Compute the degree of operating leverage

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Reference no: EM132557500

Question - Company A is a manufacturer with sales of $3,600,000 and a 60% contribution margin. Its fixed costs equal $1,600,000. Company B is a consulting firm with service revenues of $3,500,000 and a 25% contribution margin. It's fixed costs equal $340,000.

Required -

1. Compute the degree of operating leverage (DOL) for each company. Which company benefits more from a 20% increase in sales?

2. Which company benefits more from a 20% increase in sales?

Reference no: EM132557500

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