Arnold Vimka is a venture capitalist facing two alternative investment opportunities. He intends to invest $1,000,000 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. Larson Company Name Benson Variable cost per unit (a) Sales revenue (8,100 units x $30.00) Variable cost (8,100 units x a) Contribution margin Fixed cost Net income $ 20.00 $ 10.00 $ 243,000 (81,000) $ 243,000 (162,000) $ 81,000 (24,200) $ 56,800 $ 162,000 (105,200) $ 56,800 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: 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 answers to 2 decimal places.) Company Name Operating leverage Larson Benson Required A Required B Required C 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.) (Negative values should be indicated with a minus sign. Round "Percentage change" to 2 decimal places.) Company Name Show less Variable cost per unit Sales revenue Variable cost Contribution margin Fixed cost Larson Benson Net income Percentage change % % Complete this question by entering your answers in the tabs below. Required A Required B Required 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: Since the number of units decreases, both total revenue and total variable cost will decrease.) (Negative values should be indicated with a minus sign. Round "Percentage change" to 2 decimal places.) Variable cost per unit Sales revenue Variable cost Contribution margin Fixed cost Company Name Larson Benson Net income Percentage change % % Show less