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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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