Operating leverage OBJ. 5 Beck Inc. and Bryant Inc. have the following operating data:

Beck Inc. Bryant Inc.

Sales $1,250,000 $2,000,000 Variable costs 750,000 1,250,000 Contribution margin $ 500,000 $ 750,000 Fixed costs 400,000 450,000 Income from operations $ 100,000 $ 300,000

a. Compute the operating leverage for Beck Inc. and Bryant Inc.

b. How much would income from operations increase for each company if the sales of each increased by 20%?

c. Why is there a difference in the increase in income from operations for the two companies? Explain.