N Problem 11-27A (Algo) Analyzing operating leverage LO 11-3, 11-4 5 points Arnold Vinka 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 Pool 9.50 Variable cost per unit (a) Sales revenue (9,000 units $30.00) Variable cost (9,000 units) Contribution margin Fixed cost Net Income Company Name Larson Benson $ 19.00 $ $ 270,000 $ 270,000 (171,000) essee) $ 99,000 5 154.500 (24,500) (110,000) $ 74,500 $ 74,500 P References Required 3. 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 12 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 12 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.) Complete this question by entering your answers in the tabs below. Required A Required) Required Use the contribution margin approach to compute the operating leverage for each firm. (Round your antwers to 2 decimal places.) Larson Benson Company Name Operating leverage RA Required 8 > Required A Required B Required If the economy expands in coming years, Larson and Benson will both enjoy a 12 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.) (Round "Percentage answer to 2 decimal place (le, 2345 should be entered as 23.45). Round final answers to nearest whole dollar.) Show less Company Name Larson Benson 19.00 S 950 $ Variable cost per unit Sales revenue Variable cost Contribution margin Food cost Not income Percentage chango Required A Required B Required If the economy contracts in coming years, Larson and Benson will both suffer a 12 percent decrease in sales volume, assuming that the selling price remains unchanged. Compute the chapoe in net income for each firm in dollar amount and in percentage. (Note: Since the number of units decreases, both total venue and total variable cost will decrease.) (Round "Percentage answer to 2 decimal place (t ...2345 should be entered as 23.45). Round final answers to nearest whole dollar) Show less Company Name Larson Benson 19.00 $ 9.50 $ Valoble cost per unit Sales tovono Variable con Contribution margin Fixed cost Net Income Percentag change
