For Marvin Company, the magnitude of operating leverage was 3.5 during the current year. Demonstrate what this magnitude of operating leverage would mean for the company's profitability by creating an example.
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With magnitude of operating leverage of 3.5, a given percentage increase or decrease in revenue would result in a change in profits that is 3.5 times as great. For example, a 10% decrease in sales revenue would result in a 35% decrease in profit.
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