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The CVP income statement for two different companies in the same industry is depicted below: Alpha Sdn Bhd (RM) Beta Sdn Bhd (RM) Sales 800,000
The CVP income statement for two different companies in the same industry is depicted below: Alpha Sdn Bhd (RM) Beta Sdn Bhd (RM) Sales 800,000 800,000 Total Variable Cost 320,000 160,000 Contribution Margin 480,000 640,000 Total Fixed Cost 140,000 300,000 Operating Income 340,000 340,000 Required a) Compute the break-even point in ringgit for each Company. (2 marks) b) Explain why the break-even point for Beta Sdn Bhd is higher compared to Alpha Sdn Bhd (2 marks) c) Compute the margin of safety ratio and explain the significances of the ratio for Alpha Sdn Bhd and Beta Sdn Bhd. d) Compute the degree of operating leverage for each Company. (5 marks) (2 marks) e) Assume that sales revenue increases by 10%, prepare a variable costing income statement for each Company (4 marks) f) Explain how the cost structure of these two companies affects their operating leverage and profitability
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