Business, 06.05.2021 21:40 fonsworth5

The following sales and cost data (in thousands) are for two companies in the transportation industry: Company A Company B
Amount Percent of Sales Amount Percent of Sales
Sales $120,000 100% $120,000 100%
Variable costs 48,000 40 24,000 20
Contribution margin $72,000 60% $96,000 80%
Fixed costs 32,400 49,400
Operating profit $39,600 $46,600

Required:

a. Calculate the degree of operating leverage (DOL) for each company. (Round your answers to 3 decimal places.)
b. If sales increase from the present level, which company benefits more? Company A / Company B
c. Assume that sales rise 10% in the next year but that everything else remains constant. Calculate the percentage increase in profit for each company. (Do not round intermediate calculations. Input your answers as whole percentages rounded to two decimal places (i. e., .1567 = 15.67%))

Answers: 3

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