Questions:
1. A high proportion of Company X's total costs are variable with respect to units sold; a high proportion of Company Y's total costs are fixed with respect to units sold. Which company is likely to have a higher degree of operating leverage (DOL)? Explain.
2. M-Mobile Company manufactures and sells two products, black phones and white phones, in the ratio of 5:3. Fixed costs are $85,000, and the contribution margin per composite unit is $170. What number of both black and white phones is sold at the break-even point?
3. Corme Company expects sales of $34 million (400,000 units). The company's total fixed costs are $17.5 million and its variable costs are $35 per unit. Prepare a CVP chart from this information.