Question
Varner Inc. and King Inc. have the following operating data: Varner Inc. King Inc. Sales $252,500 $720,000 Variable costs 101,300 432,000 Contribution margin $151,200 $288,000
Varner Inc. and King Inc. have the following operating data:
| Varner Inc. | King Inc. | |||
| Sales | $252,500 | $720,000 | ||
| Variable costs | 101,300 | 432,000 | ||
| Contribution margin | $151,200 | $288,000 | ||
| Fixed costs | 97,200 | 144,000 | ||
| Income from operations | $54,000 | $144,000 | ||
a. Compute the operating leverage for Varner Inc. and King Inc. If required, round to one decimal place.
| Varner Inc. | |
| King Inc. |
b. How much would income from operations increase for each company if the sales of each increased by 15%? If required, round answers to nearest whole number.
| Dollars | Percentage | ||
| Varner Inc. | $ | % | |
| King Inc. | $ | % | |
c. The difference in the of income from operations is due to the difference in the operating leverages. Varner Inc.'s operating leverage means that its fixed costs are a
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Auditing Today
Authors: Emile Woolf
6th Edition
0135894662, 978-0135894668
