Chapter 16, Problem 21E

Income statements for two different companies in the same industry are as follows:

Required:

1. 1. Compute the degree of operating leverage for each company.
2. 2. Compute the break-even point for each company. Explain why the break-even point for Quintex, Inc., is higher.
3. 3. Suppose that both companies experience a 50 percent increase in revenues. Compute the percentage change in profits for each company. Explain why the percentage increase in Quintex’s profits is so much greater than that of Trimax.