Solution-Calculate degree of operating leverage for each

Calculate degree of operating leverage for each divisions

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Reference no: EM131660798

Operating Leverage Problem

Consolidated Industries operates in five different industries and includes five separate divisions within its operating structure. Select information for each of these divisions follows.

Required: Calculate the degree of operating leverage for each of the divisions. Then, address the two questions that follow related to the impact on income for each division.

	Natural Resources	Chemicals	Distribution	Consumer Goods	Finance
Sales	10,000,000	10,000,000	10,000,000	10,000,000	10,000,000
Variable expenses	5,000,000	5,000,000	5,000,000	5,000,000	5,000,000
Contribution margin	5,000,000	5,000,000	5,000,000	5,000,000	5,000,000
Fixed expenses	4,000,000	3,000,000	2,000,000	1,000,000	500,000
Net operating income	1,000,000	2,000,000	3,000,000	4,000,000	4,500,000

Degree of operating leverage

What would be the impact on income if sales increase 20%?

What would be the impact on income if sales decrease 30%?

Reference no: EM131660798

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Calculate degree of operating leverage for each divisions

Reference no: EM131660798

Reference no: EM131660798

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