Operating leverage

Asha Inc. and Samir Inc. have the following operating data:

Line Item Description	Asha Inc.	Samir Inc.
Sales	$234,500	$676,000
Variable costs	(94,100)	(405,600)
Contribution margin	$140,400	$270,400
Fixed costs	(101,400)	(166,400)
Operating income	$39,000	$104,000

a. Compute the operating leverage for Asha Inc. and Samir Inc. If required, round to one decimal place. Asha Inc. fill in the blank 1 of 2 Samir Inc. fill in the blank 2 of 2

b. How much would operating income increase for each company if the sales of each increased by 20%? If required, round answers to nearest whole number.

Company	Dollars	Percentage
Asha Inc.	$fill in the blank 3	fill in the blank 4%
Samir Inc.	$fill in the blank 5	fill in the blank 6%

c. The difference in the fill in the blank 1 of 3

increasesdecreases

of operating income is due to the difference in the operating leverages. Asha Inc.'s fill in the blank 2 of 3

higherlower

operating leverage means that its fixed costs are a fill in the blank 3 of 3

largersmaller

percentage of contribution margin than are Samir Inc.'s.