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What will be the increase in operating income for each firm

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Question - Using the information below, calculate the operating leverage for each firm:

 

James

 Jordan

Sales

 $2,000,000

$2,000,000

Variable Costs          

1,000,000

400,000

Contribution margin  

1,000,000

1,600,000

Fixed costs                

800,000

1,400,000

Operating income      

$200,000

$200,000

If the sales increase by 20%, with the variable cost per unit remaining constant and the fixed costs not changing, what will be the increase in operating income for each firm?

Reference no: EM131641224

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