Operating Leverage

Beck Inc. and Bryant Inc. have the following operating data:

	Beck Inc.		Bryant Inc.
Sales	$260,500		$640,000
Variable costs	(104,500)		(384,000)
Contribution margin	$156,000		$256,000
Fixed costs	(96,000)		(96,000)
Operating income	$60,000		$160,000

a. Compute the operating leverage for Beck Inc. and Bryant Inc. If required, round to one decimal place.

Beck Inc.	fill in the blank 1
Bryant Inc.	fill in the blank 2

b. How much would operating income increase for each company if the sales of each increased by 10%? If required, round answers to nearest whole number.

	Dollars	Percentage
Beck Inc.	$fill in the blank 3	fill in the blank 4	%
Bryant Inc.	$fill in the blank 5	fill in the blank 6	%

c. The difference in the

increasesdecreasesincreases

of operating income is due to the difference in the operating leverages. Beck Inc.'s

higherlowerhigher

operating leverage means that its fixed costs are a

largersmallerlarger

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