Operating LeverageIncome statements for two different companies in the same industry are as follows: Trimax, Inc. Quintex, Inc.Sales $240,000 $300,000 Less: Variable costs 120,000 60,000 Contribution margin $120,000 $240,000 Less: Fixed costs 90,000 210,000 Operating income $30,000 $30,000 Required:1. Compute the degree of operating leverage for each company.Trimax?Quintex?2. Compute the break-even point in dollars for each company.Trimax, Inc.?Quintex, Inc.?Why is the break-even point for Quintex, Inc., higher? 3. Suppose that both companies experience a 60 percent increase in revenues. Compute the percentage change in profits for each company.Trimax?%Quintex?% Operating LeverageIncome statements for two different companies in the same industry are as follows:Trimax, Inc.Quintex, Inc.Sales$240,000$300,000Less: Variable costs120,00060,000Contribution margin$120,000$240,000Less: Fixed costs90,000210,000Operating income$30,000$30,000Required:1. Compute the degree of operating leverage for each company.TrimaxQuintex2. Compute the break-even point in dollars for each company.Trimax, Inc.Quintex, Inc.Why is the break-even point for Quintex, Inc., higher?3. Suppose that both companies experience a 60 percent increase in revenues. Compute the percentage change in profits for each company.TrimaxX %Quintexх %

1. Trimax 120,000/30,000 4 Quintex 240,000/30,000 8 2. Trimax, Inc. 90,000/50% 180,000…

Answered: 1. Compute the degree of operating…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Operating Leverage

Income statements for two different companies in the same industry are as follows:

	Trimax, Inc.	Quintex, Inc.
Sales	$240,000	$300,000
Less: Variable costs	120,000	60,000
Contribution margin	$120,000	$240,000
Less: Fixed costs	90,000	210,000
Operating income	$30,000	$30,000

Required:

1. Compute the degree of operating leverage for each company.

Trimax	?
Quintex	?

2. Compute the break-even point in dollars for each company.

Trimax, Inc.	?
Quintex, Inc.	?

Why is the break-even point for Quintex, Inc., higher?

3. Suppose that both companies experience a 60 percent increase in revenues. Compute the percentage change in profits for each company.

Trimax	?	%
Quintex	?	%

Operating Leverage
Income statements for two different companies in the same industry are as follows:
Trimax, Inc.
Quintex, Inc.
Sales
$240,000
$300,000
Less: Variable costs
120,000
60,000
Contribution margin
$120,000
$240,000
Less: Fixed costs
90,000
210,000
Operating income
$30,000
$30,000
Required:
1. Compute the degree of operating leverage for each company.
Trimax
Quintex
2. Compute the break-even point in dollars for each company.
Trimax, Inc.
Quintex, Inc.
Why is the break-even point for Quintex, Inc., higher?
3. Suppose that both companies experience a 60 percent increase in revenues. Compute the percentage change in profits for each company.
Trimax
X %
Quintex
х %

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