Cost-Volume-Profit "Team Activity" Jen & Berry's sold 100,000 pints of ice cream last month according to the following contribution format income statement: JER & LERRY'S VOORROS SALES VARIABLE COSTS CONTRIBUTION MARGIN FIXED COSTS NET INCOME Total $ $330,000 200 000 $ 130,000 50,000 $ 80,000 Per Unit $ $3.30 2.00 $ 1.30 A competing company, Un-Friendly's, also sold 100,000 pints of ice cream last month according to the following contribution format income statement: Un-Friendly's Coconu Total $ Per Unit $ $2.55 1.00 SALES VARIABLE COSTS CONTRIBUTION MARGIN FIXED COSTS NET INCOME $255,000 100,000 $ 155,000 75,000 $ 80,000 $ 1.55 Both companies sold the same amount of ice cream and had the same Net Income but have different price and cost structures. Jen & Berry's uses higher quality ingredients (variable cost) and charges a higher price than its competitor. Un- Friendly's spends more on advertising (fixed cost) and sells at a lower price than Jen & Berry's. Analysis of Ice Cream Companies 1. Using last month's income statements on page 2, calculate the Operating Leverage for each company 2. If next month's sales increased by 10% for both companies, would the Net Income for both companies once again be equal or would one company have higher profits than the other? Briefly explain. 3. If next month's sales decreased by 10% for both companies, would the Net Income for both companies once again be equal or would one company have higher profits than the other? Briefly explain