Discuss how changes in sales volumes impacts the profits of each company.

Discuss how the cost structure of these two companies affects their operating leverage and profitability.

The following CVP income statements are available for Blanc Company and Noir Company Blanc Company Sales Variable costs Contribution margin Fixed costs Net Income $500,000 280,000 220,000 170,000 $50,000 Noir Company $500,000 180,000 320,000 270,000 $50,000 Contribution Margin Ratio Blanc Company Noir Company 0.64 Blanc Company Noir Company Break-even Point S386,364 $421,875 Margin of Safety Ratio 0.227 0.156 Blanc Company Noir Company Degree of Operating Leverage Blanc Company Noir Company CVP income statement assuming that sales revenue increases by 20%: Sales Variable costs Contribution margin Fixed costs Net Income / (Loss) Blanc Company Noir Company $600,000 $600,000 336,000 216,000 264,000 384,000 170,000 270,000 $94,000 $114,000 CVP income statement assuming that sales revenue decreases by 20: Sales Variable costs Contribution margin Fixed costs Net Income (Loss) Blanc Company Noir Company $400,000 $400,000 224,000 144,000 176,000 256.000 170,000 270,000 $6,000 ($14,000)