Question: Break-Even Sales, Operating Leverage, Change in Income Income statements for two different companies in the same industry are as follows:
Required: 1. Compute the degree of operating leverage for each company.
2. Conceptual Connection: Compute the break-even point for each company. Explain why the break-even point for Macduff is higher.
3. Conceptual Connection: Suppose that both companies experience a 30 percent increase in revenues. Compute the percentage change in profits for each company. Explain why the percentage increase in Macduff's profits is so much larger than that of Duncan.