Please help, I keep getting variable cost per unit and percentage change wrong for both tables. Operating leverage for Larson = 1.44, Benson= 2.80
Arnold Vimka is a venture capitalist facing two alternative investment opportunities. He intends to invest $1,000,000 in a start-up firm. He is nervous, however, about future economic volatility. He asks you to analyze the following financial data for the past year's operations of the two firms he is considering and give him some business advice. Variable cost per unit (a) Sales revenue (8,100 units x $29.00) Variable cost (8,100 units X a) Contribution margin Fixed cost Company Name Larson Benson $ 19.00 9.50 $ 234,900 $ 234,900 (153,900) (76,950) 81,000 $ 157,950 (24,600) (101,550) S 56,400 $ 56, 400 Net income Required a. Use the contribution margin approach to compute the operating leverage for each firm. b. If the economy expands in coming years, Larson and Benson will both enjoy a 10 percent per year increase in sales, assuming that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Note: Since the number of units increases, both revenue and variable cost will increase.) c. If the economy contracts in coming years, Larson and Benson will both suffer a 10 percent decrease in sales volume, assuming that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Note: Since the number of units decreases, both total revenue and total variable cost will decrease.) Complete this question by entering your answers in the tabs below. Required A Required B Required C If the economy expands in coming years, Larson and Benson will both enjoy a 10 percent per year increase in sales, assuming that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Note: Since the number of units increases, both revenue and variable cost will increase.) (Negative values should be indicated with a minus sign. Round "Percentage change" to 2 decimal places.) Show less : Variable cost per unit Sales revenue Company Name Larson Benson $ 20.90 $ 10.45 258,390 258,390 (169,290) (84,645) 89,100 173,745 Variable cost Contribution margin Fixed cost (24,600) 64,500 (101,550) 72,195 Net income $ $ Percentage change 0.14% 0.28 Complete this question by entering your answers in the tabs below. Required A Required B Required C If the economy contracts in coming years, Larson and Benson will both suffer a 10 percent decrease in sales volume, assuming that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Note: Since the number of units decreases, both total revenue and total variable cost will decrease.) (Negative values should be indicated with a minus sign. Round "Percentage change" to 2 decimal places.) Show less Company Name Larson Benson 17.10 $ 8.55 Variable cost per unit $ Sales revenue 211,410 Variable cost (138,510) Contribution margin 72,900 211,410 (69,255) 142, 155 (101,550) 40,605 (0.28) Fixed cost Net income $ (24,500) 48,400 (0.14) $ Percentage change
