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.