Calculate the degree of operating leverage


Response to the following problem:

Company A:

sales                           400,000

variable costs               300000

contribution margin      100000

fixed costs                   50000

operating income          50000

Company B:

sales                            400000

variable costs                200000

contribution margin       200000

fixed costs                   150000

operating income           50000

A. Calculate the degree of operating leverage for each firm.

B. Calculate the margin of safety in dollars for each firm.

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Financial Accounting: Calculate the degree of operating leverage
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