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. Company Name Lang Benac Variable cost per unit (a) 19.00 9.50 Sales revenue 3.000 unts $28.00) $ 246, 100 S246,400 Variable cost 10.000 unita a (167,200) (23.600) Contribution margin 579.200 162.800 Fixed COSE 124, 100) (107,700) Het income S5, 100 $ 55,100 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 11 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 11 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 Use the contribution margin approach to compute the operating leverage for each firm. (Round your answers to 2 decimal places.) Company Name Larson Benson Operating loverage Required B > Required A Required B Required If the economy expands in coming years, Larson and Benson will both enjoy a 11 percent per year increase in sales, assuming that the selling pnce 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 (1., 2345 should be entered as 23.45). Round final answers to nearest whole dollar) Show less Company Name Larson Benson 19.00 $ 9.50 5 Vanable cost per unit Sales revenue Variable cost Contribution margin Fixed cost Net income Percentage change Red Required If the economy contract cong years, Larson and Benson w both safer a 11 percent decrease in sales volume assuming that the selling price romain unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Notor since the number of unus decreases, both total revenue and total variable cost will decreane) (und Percentage answer to 2 decimal place (2345 should be entered as 23.45). Nound firal answers to nearest whole dollar) Company Name Lomon Banson 19.00 $ 950 $ Variable cost per un Sales revenue Vanable cost Contribution margin Foxed cost Net income Percentage change Required