Question
Asha Inc. and Samir Inc. have the following operating data: Asha Inc. Samir Inc. Sales $272,500 $728,000 Variable costs (109,300) (436,800) Contribution margin $163,200
Asha Inc. and Samir Inc. have the following operating data: Asha Inc. Samir Inc. Sales $272,500 $728,000 Variable costs (109,300) (436,800) Contribution margin $163,200 $291,200 Fixed costs (95,200) (109,200) Operating income $68,000 $182,000 a. Compute the operating leverage for Asha Inc. and Samir Inc. If required, round to one decimal place. Asha Inc. 2.4 Samir Inc. 1.0 X b. How much would operating income increase for each company if the sales of each increased by 15%? If required, round answers to nearest whole number. Dollars Percentage Asha Inc. % Samir Inc. % c. The difference in the increases of operating income is due to the difference in the operating leverages. Asha Inc.'s higher operating leverage means that its fixed costs are a larger percentage of contribution margin than are Samir Inc.'s.
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