Operating leverage. Duxbury Co. reports the following data for product ABC and product XYZ for the current year:
ABCXYZ
Sales $ 36,00028,800
Variable cost 12,00010,800
Total fixed cost$18,00016,000
Required:
(a) What is operating leverage? How can the degree of operating leverage be used in analyzing changes in sales?
(b) Calculate Duxbury's pretax income.
(c) Calculate Duxbury's degree of operating leverage. Explain your answer if the company projects an increase or decrease in sales of each product by 10%.
Answers: 1
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