Assume that two companies, Brake, Inc. and Carbo, Inc., have the following operating results:

Brake, Inc.

Carbo, Inc.

Sales

$300,000 Brake, Inc

$300,000 Carbo, Inc

Variable Costs

60,000 Brake Inc

180,000 Carbo Inc

Fixed Costs

210,000 Brake Inc

90,000 Carbo Inc

Operating Income

$30,000B Brake Inc

$30,000 Carbo, Inc

Tasks:

• Calculate the contribution margin and breakeven point for both companies.
• Compare the two companies. What conclusions could you make regarding the use of operating leverage employed by the two firms?
• What recommendations would you make to the two companies and why?