Income Statements for Two Different Wineries Are as Follows A Calculate the Degree of Operating Leverage for Each Firm

Essay

Income statements for two different wineries are as follows:
$\begin{array}{lrr}&\text { White Wine } & \text { Red Wine } \\&\text { Company } & \text { Company }\\\text { Sales } & \$ 400,000 & \$ 400,000 \\\text { Less: Variable costs } & 300,000 & 200,000 \\\hline\text { Contribution margin } & \$ 100,000 & \$ 200,000 \\\text { Less: Fixed costs } & 50,000 & 150,000 \\\text { Operating income } & \$ 50,000 & \$ 50,000\end{array}$ A. Calculate the degree of operating leverage for each firm.
B. Calculate the margin of safety in dollars for each firm.
C. Determine the operating income for each firm if sales increase by $20 \%$ .