Chapter 21, Problem 24E

To determine

Concept Introduction:

Cost Volume Profit (CVP) Analysis:

The Cost Volume Profit analysis is the analysis of the relation between cost, volume, and profit of a product. It analyzes the cost and profits at the different level of production, in order to determine the breakeven point and required the level of sales to earn the desired profit.

The degree of operating leverage (DOL) is a measure used to evaluate how a company's operating income changes with respect to a percentage change in its sales. A company's operating leverage involves fixed costs and variable costs.

DOL = Contribution/EBIT

The Degree of operating leverage and which Company shall be benefited ore from 20% increase in sales