19-14

Exercise 19-14 The CVP income statements shown below are available for Armstrong Company and Contador Company. Armstrong Co. Contador Co. Sales Variable costs Contribution margin Fixed costs Net income $500,000 241,000 259,000 158,000 $101,000 $500,000 53,000 447,000 346,000 $101,000 (a) Compute the degree of operating leverage for each company. (Round answers to 3 decimal places, e.g. 1.15o.) Armstrong Contador (b) Assuming that sales revenue increases by 10%, prepare a variable costing income statement for each company. Armstrong Company Contador Company