The Following Information Is Available for the Blue and Red

The following information is available for the Blue and Red Companies for 2009
$\begin{array}{lcc}&\underline{\text { Blue} }& \underline{\text { Red }}\\ \text { Sales (200 000 units) } &\$1800000&\$1800000\\ \text { Variable costs } &\underline{800000}&\underline{1200000}\\ \text {Contribution margin } &1000000&600000\\ \text { Fixed costs } &\underline{500000\$}&\underline{100000\$}\\ \text { Net income } &\underline{500000}&\underline{500000}\\\end{array}$

Required:
A. Compute the pperating leverage for each company and explan what qperating leverage measures.

B. If both companies exiderience a $20 \%$ increase in sales volume, will they continue to have the same net income? Why ar why not? Explan your answer with respect to each company's operating leverage.