Question
Operating Leverage Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $157,000 $375,000 Variable costs 63,000 225,000 Contribution margin
Operating Leverage
Beck Inc. and Bryant Inc. have the following operating data:
| Beck Inc. | Bryant Inc. | |||
| Sales | $157,000 | $375,000 | ||
| Variable costs | 63,000 | 225,000 | ||
| Contribution margin | $94,000 | $150,000 | ||
| Fixed costs | 47,000 | 25,000 | ||
| Income from operations | $47,000 | $125,000 | ||
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 income from operations increase for each company if the sales of each increased by 20%? 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 increases of income from operations is due to the difference in the operating leverages. Beck Inc.'s higher operating leverage means that its fixed costs are a larger percentage of contribution margin than are Bryant Inc.'s.
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International Accounting
Authors: Frederick D. Choi, Gary K. Meek
6th edition
131588141, 978-0131588141
