REQUIRED

Operating Leverage Example

	ABC Company	ABC Company	XYZ Company	XYZ Company
Sales	$ 600,000	$ 1,000,000	$ 600,000	$ 1,000,000
Variable Costs:
Cost of goods sold (% of sales)	300,000	(50%) ?	180,000	(30%) ?
Sales taxes	30,000	(5%) ?	30,000	(5%) ?
Sales commissions	60,000	(10%) ?	60,000	(10%) ?
Contribution Margin	210,000		330,000
Fixed Costs:
Manufacturing OH	75,000	75,000	195,000	195,000
Selling & Admin	35,000	35,000	35,000	35,000
Net Income	$ 100,000	?	$ 100,000

Operating Leverage Example

With $600,000 sales, what is the Operating Leverage for ABC Company? BLANK-1

With $600,000 sales, what is the Operating Leverage for XYZ Company? BLANK-2

With $1,000,000 Sales

ABC Company -

Cost of goods sold BLANK-3

Sales taxes BLANK-4

Sales commissions BLANK-5

Contribution Margin BLANK-6

Net Income BLANK-7

With $1,000,000 Sales

XYZ Company -

Cost of goods sold BLANK-8

Sales taxes BLANK-9

Sales commissions BLANK-10

Contribution Margin BLANK-11

Net Income BLANK-12

Which company showed the greatest impact from the increase in sales? BLANK-13