Question
Operating Leverage Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $210,400 $561,000 Variable costs 84,400 336,600 Contribution margin
Operating Leverage
Beck Inc. and Bryant Inc. have the following operating data:
Beck Inc. | Bryant Inc. | |||
Sales | $210,400 | $561,000 | ||
Variable costs | 84,400 | 336,600 | ||
Contribution margin | $126,000 | $224,400 | ||
Fixed costs | 56,000 | 37,400 | ||
Income from operations | $70,000 | $187,000 |
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 10%? 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.
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