Exercise 18-24 Operating leverage computed and applied LO A2

Company A is a manufacturer with current sales of $3,100,000 and a 60% contribution margin. Its fixed costs equal $1,390,000. Company B is a consulting firm with current service revenues of $3,200,000 and a 20% contribution margin. Its fixed costs equal $150,000.

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

Contribution Margin Income Statement Company A Company B Degree of Operating Leverage 1 Denominator = Choose Numerator Ratio Degree of Operating Leverage Company A Company B