Problem 11-27A (Algo) Analyzing operating leverage LO 11-3, 11-4 Arnold Vimka is a venture capitalist facing two alternative investment opportunities. He intends to invest $1 million 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 (0) Sales revenue (0.200 units $39.00) Variable cost (8,200 units a) Contribution, margin Fixed cost Net Income Company Name Larson Benson $ 20.00 20.00 5.254,200 $ 254,200 (164,000 (82,000 $ 90,200 172,200 (24,100 (106,300) 365,900 $ 65,900 Required a. Use the contribution margin approach to compute the operating leverage for each firm b. If the economy expands in coming years, Lison and Benson will both enjoy a 12 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. the economy contracts in coming years, Larson and Benson will both suffer a 12 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 Required Required If the economy expands in coming years, Laragn and Benson will both enjoy a 12 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.) (Round Percentage answer to 2 decimal place le 2345 should be entered as 23.45). Hound final answers to nearest whole doline) Show less Complete this question by entering your answers in the tabs below. Required A Required B Required If the economy expands in coming years, Larson and Benson will both enjoy a 12 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.) (Round "Percentage answer to 2 decimal place (ie. 2345 should be entered as 23 45). Round final answers to nearest whole dollar) Show less Company Name Larson Benson 20.00 10.00 $ Variable cost per unit Saison Variable cont Contribution margin Fixed cost Not income Percentage change
