The following sales and cost data (in thousands) are for two companies in the transportation industry:...

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The following sales and cost data (in thousands) are for two companies in the transportation industry:...

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	$	110,000		100	%	$	110,000		100	%
Variable costs		55,000		50			22,000		20
Contribution margin	$	55,000		50	%	$	88,000		80	%
Fixed costs		20,900					35,900
Operating profit	$	34,100				$	52,100

Required:

1-a. Calculate the degree of operating leverage (DOL) for each company.

1-b. If sales increase from the present level, which company benefits more?

2. Assume that sales rise 5% in the next year but that everything else remains constant. Calculate the percentage increase in profit for each company.

business accounting

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