1. The following CVP income statements are available for ABC Company and XYZ w ompany. АВС Сompany Sales Variable costs Contribution margin Fixed costs Operating income CVP I/S for 2020 $500,000 300,000 200,000 180,000 $ 20,000 XYZ Company CVP I/S for 2020 $500,000 180,000 320,000 300,000 $ 20,000 (a) Compute the break-even point in dollars and the margin of safety ratio for each wm w m company. (b) Compute the degree of operating leverage for each company. (c) Assuming that sales revenue decreases by 20%, prepare a CVP income statement for each company. w w ww www. mdn w m m m m
1. The following CVP income statements are available for ABC Company and XYZ w ompany. АВС Сompany Sales Variable costs Contribution margin Fixed costs Operating income CVP I/S for 2020 $500,000 300,000 200,000 180,000 $ 20,000 XYZ Company CVP I/S for 2020 $500,000 180,000 320,000 300,000 $ 20,000 (a) Compute the break-even point in dollars and the margin of safety ratio for each wm w m company. (b) Compute the degree of operating leverage for each company. (c) Assuming that sales revenue decreases by 20%, prepare a CVP income statement for each company. w w ww www. mdn w m m m m
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:1. The following CVP income statements are available for ABC Company and XYZ
Company.
Sales
Variable costs
Contribution margin
Fixed costs
Operating income
ABC Company
CVP I/S for 2020
$500,000
300,000
200,000
180,000
$ 20,000
XYZ Company
CVP I/S for 2020
$500,000
180,000
320,000
300,000
$ 20,000
med m
(a) Compute the break-even point in dollars and the margin of safety ratio for each
w ww w w w
w h m w m ww m
company.
(b) Compute the degree of operating leverage for each company.
(c) Assuming that sales revenue decreases by 20%,
each
a CVP income statement for
w w w w ww w
www w w m wm
company.
(d) Assuming that sales revenue increases by 20%, calculate the operating incomes of the
two companies without
w w w w
ww med m
www S WInoul preparing income statement. (Use DOL)
nea ww w
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