Marina Manufacturing is considering buying new equipment for its factory. The new equipment will reduce variable labor costs but increase depreciation expense. Contribution margin is expected to increase from $250,000 to $300,000. Net income is expected to remain the same at $100,000 Compute the degree of operating leverage before and after the purchase of the new equipment and interpret your results. (Round answers to 2 decimal places, eg. 15.25) Degree of operating leverage Before After eTextbook and Media

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Marina Manufacturing is considering buying new equipment for its factory. The new equipment
will reduce variable labor costs but increase depreciation expense. Contribution margin is
expected to increase from $250,000 to $300,000. Net income is expected to remain the same at
$100,000
Compute the degree of operating leverage before and after the purchase of the new equipment
and interpret your results. (Round answers to 2 decimal places, eg. 15.25)
Degree of operating leverage
Before
After
eTextbook and Media
Transcribed Image Text:Marina Manufacturing is considering buying new equipment for its factory. The new equipment will reduce variable labor costs but increase depreciation expense. Contribution margin is expected to increase from $250,000 to $300,000. Net income is expected to remain the same at $100,000 Compute the degree of operating leverage before and after the purchase of the new equipment and interpret your results. (Round answers to 2 decimal places, eg. 15.25) Degree of operating leverage Before After eTextbook and Media
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