Company A has current sales of $4.000.000 and a 45% contribution margin. Its fixed costs are S600.000.Company B is a service firm with current service revenue of $2,800,000 and a 15% contribution margin.Company B's fixed costs are $375,000. Compute the degree of operating leverage for both companies.

Formula: Degree of operating leverage = Total Contribution margin / net income

Company A has current sales of $4.000.00 and a 45% contribution margin. Its fixed costs are S600.000. Company B is a service firm with current servicerevenueof S2,800,000 and a 15% contribution margin. Company B's fixed costs are $375,000. Compute the degree of operating leverage for both companies.

Company A has current sales of $4.000.00 and a 45% contribution margin. Its fixed costs are S600.000. Company B is a service firm with current servicerevenueof S2,800,000 and a 15% contribution margin. Company B's fixed costs are $375,000. Compute the degree of operating leverage for both companies.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 14EB: Company A has current sales of $4,000,000 and a 45% contribution margin. Its fixed costs are...

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