The following information is for Gable, Inc. and Harlowe, Inc. for the recent year. Based on the above data, which company has a higher operating leverage?
A) Gable, Inc.
B) Harlowe, Inc.
C) Operating leverage is the same for both companies
D) Cannot be determined

Question

The following information is for Gable, Inc. and Harlowe, Inc. for the recent year.  Based on the above data, which company has a higher operating leverage?
A) Gable, Inc. 
B) Harlowe, Inc. 
C) Operating leverage is the same for both companies 
D) Cannot be determined

Quizplus · Accepted Answer

Harlowe, Inc. has a higher operating leverage as its contribution margin is much higher than its fixed costs compared to Gable, Inc. This can be seen from the higher degree of operating leverage (DOL) of Harlowe, Inc. (3.2) compared to Gable, Inc. (2.4).

The Following Information Is for Gable, Inc