Arnold Vimia is a venture capitalist facing two alternative investment opportunities. He intends to invest $1 million in a start-up firm. He is nervous, however, about future economic volatility. He asks you to analyze the following financial data for the past year's operations of the two firms he is considering and give him some business advice. Variable cost per unit (a) Sales revenue 18,300 units $30.00) Variable cont (1.300 units a) contribution margin Yixed cost Net incon Company Name Larson Benson $ 21.00 $ 10.50 $ 249,000 $ 249,000 (174.300) 102. 150) $ 74,700 $ 161,850 124,000) (111,150) 550.700 $50,700 Required a. Use the contribution margin approach to compute the operating leverage for each firm. b. If the economy expands in coming years, Larson and Benson will both enjoy a 12 percent per year increase in sales, assuming that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage (Note: Since the number of units increases, both revenue and variable cost will increase) c. If the economy contracts in coming years, Larson and Benson will both suffer a 12 percent decrease in sales volume, assuming that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Note: Saved c. If the economy contracts in coming years, Larson and Benson will both suffer a 12 percent decrease the selling price remains unchanged. Compute the change in net income for each firm in dollar ama Since the number of units decreases, both total revenue and total variable cost will decrease.) Complete this question by entering your answers in the tabs below. Required A Required B Required C Use the contribution margin approach to compute the operating leverage for each firm. (Round your answ places.) Larson Benson Company Name Operating leverage ng your answers in the tabs below. Required A Required B Required If the economy expands in coming years, Larson and Benson will both enjoy a 12 percent per year increase in sales, assuming that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Note: Since the number of units increases, both revenue and variable cost will increase.) (Round "Percentage" answer to 2 decimal place (i.e., .2345 should be entered as 23.45). Round final answers to nearest whole dollar.) Show less Company Name Larson Benson 21.00 $ 10.50 $ Variable cost per unit Sales revenue Variable cost Contribution margin Fixed cost Net Income Percentage change Check Complete this question by entering your answers in the tabs below. Required A Required B Required If the economy contracts in coming years, Larson and Benson will both suffer a 12 percent decrease in sales volume, assuming that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Note: Since the number of units decreases, both total revenue and total variable cost will decrease.) (Round "Percentage answer to 2 decimal place (le, 2345 should be entered as 23.45). Round final answers to nearest whole dollar) Show less Company Name Larson Benson 21.00 $ 10.50 Variable cost per unit Sales revenue Variable cost Contribution margin Fixed cost Net income Percentage change
