Degree of operating leverage

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Reference no: EM13914276

Marina Manufacturing is considering buying new equipment for its factory. The new equipment will reduce variable labor costs but increase depreciation expense. Contribution margin is expected to increase from $250,000 to $300,000. Net income is expected to remain the same at $100,000.

Compute the degree of operating leverage before and after the purchase of the new equipment and interpret your results.

Reference no: EM13914276

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