Company A is a manufacturer with current sales of $ 6,000,000 and a 60% contribution margin. Its fixed costs equal $ 2,600,000. Company B is a consulting firm with current service revenues of $ 4,500,000 and a 25% contribution margin. Its fixed costs equal $ 375,000. Compute the degree of operating leverage (DOL) for each company. Identify which company benefits more from a 20% increase in sales and explain why.
Answer to relevant QuestionsThe following costs result from the production and sale of 1,000 drum sets manufactured by Tom Thompson Company for the year ended December 31, 2013. The drum sets sell for $ 500 each. The company has a 25% income tax ...This year Bertrand Company sold 40,000 units of its only product for $ 25 per unit. Manufacturing and selling the product required $ 200,000 of fixed manufacturing costs and $ 325,000 of fixed selling and administrative ...This year Best Company earned a disappointing 5.6% after- tax return on sales ( net income/ sales) from marketing 100,000 units of its only product. The company buys its product in bulk and repackages it for resale at the ...How can the manager of snowmobile sales at Arctic Cat use flexible budgets to enhance performance?Alvarez Company’s output for the current period yields a $ 20,000 favorable overhead volume variance and a $ 60,400 unfavorable overhead controllable variance. Standard overhead charged to production for the period is $ ...
Post your question