The CVP income statements shown below are available for Hoffman Company and Tolan Company.

Instructions
(a) Compute 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 andprofitability.

Hornmian Co.folAn Co. $600,000 80,000 $600,000 280,000 320,000 170,000 $150,000 Sales revenue Variable costs Contribution margin Fixed costs 520,000 Net income $150,000