Question 30

The degrees of operating leverage for Delta Corp. and Epsilon Co. are 1.95 and 5.15, respectively. Both have operating incomes of $56,600. Determine their respective contribution margins.

Contribution margins

Delta Corp. $

Epsilon Co. $

Contribution margins

For Delta Corp is $110370

For Epsilon Co. is $291490

Step-by-step explanation

Degree of operating leverage=contribution margin/operating income

Delta Corp.

Degree of operating leverage =1.95

Operating income = $56,600

Degree of operating leverage=contribution margin/operating income

1.95=Contribution margin/56600

Contribution margin=1.95*56600

                                   =$110370

Epsilon Co.

Degree of operating leverage =5.15

Operating income = $56,600

Degree of operating leverage=contribution margin/operating income

5.15=Contribution margin/56600

Contribution margin=5.15*56600

                                   =$291490