Question
The CVP income statements shown below are available for Armstrong Company and Contador Company. Armstrong Co. Contador Co. Sales $495,000 $495,000 Variable costs 244,000 55,000
The CVP income statements shown below are available for Armstrong Company and Contador Company.
Armstrong Co. | Contador Co. | |||
Sales | $495,000 | $495,000 | ||
Variable costs | 244,000 | 55,000 | ||
Contribution margin | 251,000 | 440,000 | ||
Fixed costs | 151,000 | 340,000 | ||
Net income | $100,000 | $100,000 |
(a1) Compute the degree of operating leverage for each company. (Round answers to 2 decimal places, e.g. 1.15.)
Degree of Operating Leverage | ||
Armstrong | ||
Contador |
(b) Assuming that sales revenue increases by 10%, prepare a variable costing income statement for each company.
Armstrong Company | Contador Company | |||
Contribution MarginSelling ExpensesAdministrative ExpensesTotal Fixed ExpensesVariable CostsSales RevenueTotal Variable ExpensesCost of Goods SoldGross ProfitFixed CostsNet Income/(Loss) | $ | $ | ||
Contribution MarginVariable CostsSelling ExpensesTotal Fixed ExpensesSales RevenueCost of Goods SoldTotal Variable ExpensesFixed CostsAdministrative ExpensesGross ProfitNet Income/(Loss) | ||||
Cost of Goods SoldGross ProfitTotal Fixed ExpensesSales RevenueSelling ExpensesVariable CostsTotal Variable ExpensesAdministrative ExpensesContribution MarginFixed CostsNet Income/(Loss) | ||||
Administrative ExpensesNet Income/(Loss)Variable CostsSelling ExpensesTotal Variable ExpensesCost of Goods SoldFixed CostsSales RevenueTotal Fixed ExpensesGross ProfitContribution Margin | ||||
Contribution MarginFixed CostsNet Income/(Loss)Variable CostsSales RevenueCost of Goods SoldAdministrative ExpensesTotal Variable ExpensesSelling ExpensesTotal Fixed ExpensesGross Profit | $ | $ |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started