Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The following sales and cost data (in thousands) are for two companies in the transportation industry: Company A Company B Sales Variable costs Contribution margin

The following sales and cost data (in thousands) are for two companies in the transportation industry: Company A Company B Sales Variable costs Contribution margin Fixed costs Operating profit Required: Amount $ 100,000 50,000 $ 50,000 15,000 $ 35,000 Percent Percent of of Sales Amount Sales 100% $ 100,000 100% 50 30,000 30 50% $ 70,000 70% 40,000 $ 30,000 1-a. Calculate the degree of operating leverage (DOL) for each company. 1-b. If sales increase from the present level, which company benefits more? 2. Assume that sales rise 10% in the next year but that everything else remains constant. Calculate the percentage increase in profit for each company. Complete this question by entering your answers in the tabs below. Req 1A Req 18 Req 2 Calculate the degree of operating leverage (DOL) for each company. (Round your answers to 3 decimal places.) Company A Company B Degree of operating leverage Req 1A Req 1B Req 2 If sales increase from the present level, which company benefits more? Company A Company B Req 1A Req 1B Req 2 Assume that sales rise 10% in the next year but that everything else remains constant. Calculate the percentage increase in profit for each company. (Input your answers as percentages rounded to 2 decimal places (i.e., 0.1567 = 15.67%).) Increase in profit Company A Company B % %

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting A Business Process Approach

Authors: Jane L. Reimers

1st Edition

0536633711, 978-0536633712

More Books

Students also viewed these Accounting questions

Question

2. What do you believe is at the root of the problem?

Answered: 1 week ago