Manufacturer with current sales and contribution margin

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Reference no: EM131287981

Company A is a manufacturer with current sales of $3,500,000 and a 50% contribution margin. Its fixed costs equal $1,320,000. Company B is a consulting firm with current service revenues of $3,600,000 and a 20% contribution margin. Its fixed costs equal $270,000.

Compute the degree of operating leverage (DOL) for each company.

Identify which company benefits more from a 20% increase in sales.

Company A

Company B

Reference no: EM131287981

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