The following sales and cost data (in thousands) are for two companies in the transportation industry: Company A Percent Amount of Sales $ 190,000 100% 50 50% 95,000 $ 95,000 24,700 $ 70,300 Sales Variable costs Contribution margin Fixed costs Operating profit Company B Amount $ 190,000 57,000 $ 133,000 55,700 $77,300 Percent of Sales 100% 30 70% 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.
The following sales and cost data (in thousands) are for two companies in the transportation industry: Company A Percent Amount of Sales $ 190,000 100% 50 50% 95,000 $ 95,000 24,700 $ 70,300 Sales Variable costs Contribution margin Fixed costs Operating profit Company B Amount $ 190,000 57,000 $ 133,000 55,700 $77,300 Percent of Sales 100% 30 70% 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
please solve all parts within 30 mins
![The following sales and cost data (in thousands) are for two companies in the transportation industry:
Company A
Company B
Percent
Amount of Sales
$ 190,000 100%
30
57,000
70%
$ 133,000
55,700
$ 77,300
Sales.
Variable costs
Contribution margin
Fixed costs
Operating profit
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.
Req 1A
Amount
$ 190,000
95,000
$ 95,000
24,700
$70,300
Complete this question by entering your answers in the tabs below.
Req 1B
Percent
Sales
100%
50
50%
Degree of operating leverage
Req 2
Calculate the degree of operating leverage (DOL) for each company. (Round your answers to 3 decimal places.)
Company A
Company B
< Req 1A
Req 1B >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc0a98e2c-9323-41e8-89eb-d62aec689c42%2F15a32eaf-0863-494f-be47-e3aa714c6841%2Ffv3sucw_processed.jpeg&w=3840&q=75)
Transcribed Image Text:The following sales and cost data (in thousands) are for two companies in the transportation industry:
Company A
Company B
Percent
Amount of Sales
$ 190,000 100%
30
57,000
70%
$ 133,000
55,700
$ 77,300
Sales.
Variable costs
Contribution margin
Fixed costs
Operating profit
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.
Req 1A
Amount
$ 190,000
95,000
$ 95,000
24,700
$70,300
Complete this question by entering your answers in the tabs below.
Req 1B
Percent
Sales
100%
50
50%
Degree of operating leverage
Req 2
Calculate the degree of operating leverage (DOL) for each company. (Round your answers to 3 decimal places.)
Company A
Company B
< Req 1A
Req 1B >
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