Question
Operating Leverage Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $1,250,000 $2,000,000 Variable costs 750,000 1,250,000 Contribution margin
Operating Leverage
Beck Inc. and Bryant Inc. have the following operating data:
| Beck Inc. | Bryant Inc. | |||
| Sales | $1,250,000 | $2,000,000 | ||
| Variable costs | 750,000 | 1,250,000 | ||
| Contribution margin | $500,000 | $750,000 | ||
| Fixed costs | 400,000 | 450,000 | ||
| Income from operations | $100,000 | $300,000 | ||
a. Compute the operating leverage for Beck Inc. and Bryant Inc. If required, round to one decimal place.
| Beck Inc. | |
| Bryant Inc. |
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. | $ | % |
| Bryant Inc. | $ | % |
c. The difference in the of income from operations is due to the difference in the operating leverages. Beck Inc.'s operating leverage means that its fixed costs are a percentage of contribution margin than are Bryant Inc.'s.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Cost Accounting College Version
Authors: Steven M. Bragg
1st Edition
1938910702, 978-1938910708
