Income statements for two different companies in the same industry are as follows:
1. Compute the degree of operating leverage for each company.
2. Compute the break-even point for each company. Explain why the break-even point for Macduff is higher.
3. Suppose that both companies experience a 30 percent increase in revenues. Compute the percentage change in profits for each company. Explain why the percentage increase in Macduff’s profits is so much larger than that of Duncan.