The following sales and cost data (in thousands) are for two companies in the transportation...
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Accounting
The following sales and cost data (in thousands) are for two companies in the transportation industry:
| Company A | Company B | ||
|---|---|---|---|
| Amount | Percent of Sales | Amount | Percent of Sales |
| Sales | $ 230,000 | 100% | $ 230,000 |
| Variable costs | 115,000 | 50 | 69,000 |
| Contribution margin | $ 115,000 | 50% | $ 161,000 |
| Fixed costs | 18,400 | 57,400 | |
| Operating profit | $ 96,600 | $ 103,600 |
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.
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