Sales 400000 400000 variable costs 300000 300000

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Sales $400,000 $400,000 Variable costs 300,000 300,000 Contribution margin $100,000 $100,000 Fixed costs 80,000 50,000 Income from operations $ 20,000 $ 50,000 Operating leverage ? ? Operating Leverage Example 5 5
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11-57 19-57 Jones Inc. Wilson Inc. Sales $400,000 $400,000 Variable costs 300,000 300,000 Contribution margin $100,000 $100,000 Fixed costs 80,000 50,000 Income from operations $ 20,000 $ 50,000 Operating leverage ? ? Operating Leverage Example 5 2 Contribution Margin Income from Operations $100,000 $50,000 = 2 Wilson Inc.: 5
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11-58 19-58 Margin of Safety The margin of safety indicates the possible decrease in sales that may occur before an operating loss results. 5
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