A Tech has fixed costs of $9 million and profits of $5 million. Its competitor, Z Tech, is roughly the same size and this year earned the same profits, $5 million. But it operates with higher fixed costs of $8 million and lower variable costs.

Required:

What is the degree of operating leverage (DOL) for each company? (Defined here as 1 + Fixed costs/Profit.)

Answer rating: 100% (QA)

The degree of operating leverage DOL can be calculat... View the full answer