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 year's operations of the two firms he is considering and give him some business advice. Variable cost per unit() Sales revenue (8,900 units X $28.00) Variable cost (8,900 units Xa) Contribution margin Fixed cost Net Income Company Name Larson flenson $ 21.00 $ 10. Se $ 249,200 $249,200 (186.900) (23,450) $ 62,300 5 155,750 (24,600) (113,050) 537,700 537700 Required d. 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 11 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 11 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 (Noter 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 Required If the economy expands in coming years, Larson and Bension will both enjoy a 11 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) (Found "Percentage wer to 2 decimal place ... 2345 should be entered as 23:45). Round final answers to nearest whole dollar) Show Complete this question by entering 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 11 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 cont will increase.) (Round "Percentage" answer to 2 decimal place (.e., -2345 should be entered on 23:45). Round final answers to nearest whole dollar.) Show less Company Name Lamon Benson 2100 $ 10.50 S Variable cost per un Sales revenue Variable cost Contribution margin Fored cost Not income Percentage change 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 11 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 ( 12345 should be entered as 23.45). Round final as to nearest whole dollar) Show less Company Name Larson Benson 21.00 S 1050 $ Variable cont per un Sales revenue Variable cost Contribution margin Faed cost Net Income Percentage change
