Question
The following sales and cost data (in thousands) are for two companies in the transportation industry: Company A Company B Amount Percent of Sales Amount
The following sales and cost data (in thousands) are for two companies in the transportation industry:
Company A | Company B | |||
---|---|---|---|---|
Amount | Percent of Sales | Amount | Percent of Sales | |
Sales | $ 240,000 | 100% | $ 240,000 | 100% |
Variable costs | 120,000 | 50 | 72,000 | 30 |
Contribution margin | $ 120,000 | 50% | $ 168,000 | 70% |
Fixed costs | 21,600 | 62,600 | ||
Operating profit | $ 98,400 | $ 105,400 |
Required:
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.
Lawn Master Company, a manufacturer of riding lawn mowers, has a projected income for the coming year as follows:
Sales | $ 33,000,000 | |
---|---|---|
Operating expenses: | ||
Variable expenses | $ 26,400,000 | |
Fixed expenses | 3,300,000 | |
Total expenses | 29,700,000 | |
Operating profit | $ 3,300,000 |
Required:
1. Determine the breakeven point in sales dollars.
2. Determine the required sales in dollars to earn a before-tax profit of $3,900,000. (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)
3. What is the breakeven point in sales dollars if the variable expenses increases by 12%? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.)
I have been stuck on this for the past 3.5 hours, at this point the frustration is giving my a complete mental block. Please help me. Thank you in advance it is appreciated greatly.
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