The CVP income statements shown below are available for Billings Company and Bozeman Company.

Instructions
(a) Calculate the degree of operating leverage for each company and interpret your results.
(b) Assuming that sales revenue increases by 10%, prepare a variable costing income statement for each company.
(c) Discuss how the cost structure of these two companies affects their operating leverage and profitability.

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Sales revenue Variable costs Contribution margin Fixed costs Operating income Billings Co. $600,000 320,000 280,000 180,000 $100,000 Bozeman Co. $600,000 120,000 480,000 380,000 $100,000