Arnold Vimka 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 years operations of the two firms he is considering and give him some business advice.

Company Name

Larson

Benson

Variable cost per unit (a)

$

20.00

$

10.00

Sales revenue (8,300 units $30.00)

$

249,000

$

249,000

Variable cost (8,300 units a)

(166,000

)

(83,000

)

Contribution margin

$

83,000

$

166,000

Fixed cost

(24,000

)

(107,000

)

Net income

$

59,000

$

59,000

Use the contribution margin approach to compute the operating leverage for each firm.(FILL IN WHERE X IS)

Company Name	Larson	Benson
Operating leverage	X	X