Rose Inc. and Tulip Inc. have the following operating data: ROSE INC. SALES- 920,000 VARIABLE COST 552,000

Question:

Rose Inc. and Tulip Inc. have the following operating data:

ROSE INC. SALES- 920,000

VARIABLE COST 552,000 CONTRIBUTION MARGIN 368,000

FIXED COSTS 288,000 INCOME FROM OPERATIONS 80,000

TULIP INC. SALES-1,050,000 VARIABLE COSTS 630,000

CONTRIBUTION MARGIN 420,000

FIXED COSTS 270,000 INCOME FROM OPERATIONS 150,000

a. Compute the operating leverage for Rose Inc. and Tulip Inc. If required, round to one decimal place.

Rose Inc. 4.6

Tulip Inc. 2.8

b. How much would income from operations increase for each company if the sales of each increased by 25%?

Dollars Percentage

Rose Inc. $ %

Tulip Inc. $ %

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...