Problem

Calculating Degree of Operating LeverageRefer to the information in M6-12 for Laurel Compa...

Calculating Degree of Operating Leverage

Refer to the information in M6-12 for Laurel Company and Hardy Inc.

Required:

1. Calculate each company’s degree of operating leverage.


2. Explain why companies with the same total sales and net income have different degrees of operating leverage.


3. Compare these two companies’ vulnerability to market fluctuations.

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