Question
Operating Leverage Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $208,400 $640,000 Variable costs 83,600 384,000 Contribution margin
Operating Leverage
Beck Inc. and Bryant Inc. have the following operating data:
Beck Inc. | Bryant Inc. | |||
Sales | $208,400 | $640,000 | ||
Variable costs | 83,600 | 384,000 | ||
Contribution margin | $124,800 | $256,000 | ||
Fixed costs | 76,800 | 128,000 | ||
Income from operations | $48,000 | $128,000 |
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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