Profits larger or smaller if firm increased operating leverage
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Changes in sales can cause changes in profits. Would the profit change associated with sales changes be larger or smaller if a firm increased its operating leverage? Explain your answer.
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Solution Summary
The solution examines if the profits are larger is smaller if firm increased operating leverages.
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ANSWERS
First, the degree of operating leverage (DOL) measures how much a $1 increase in revenue affects the company's operating income. DOL is measured by
Contribution margin ...
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