Operating Leverage
Income statements for two different companies in the same
industry are as follows:
Trimax, Inc.
Quintex, Inc.
Sales
$600,000
$675,000
Less: Variable costs
300,000
135,000
Contribution margin
$300,000
$540,000
Less: Fixed costs
240,000
480,000
Operating income
$60,000
$60,000
Required:
1. Compute the degree of operating leverage for
each company.
Trimax
Quintex
2. Compute the break-even point in dollars for
each company.
Trimax, Inc.
$
Quintex, Inc.
$
Why is the break-even point for Quintex, Inc., higher?
Because it...