Asha Inc. and Samir Inc. have the following operating data: Sales Variable costs Contribution margin Fixed costs Asha Inc. $2,500,000 (1,500,000) $1,000,000 (800,000) $200,000 Asha Inc. Samir Inc. Samir Inc. $4,000,000 (2,500,000) $1,500,000 (900,000) $600,000 Operating income a. Compute the operating leverage for Asha Inc. and Samir Inc. If required, round to one decimal place. Asha Inc. 150 75 Samir Inc. b. How much would operating income increase for each company if the sales of each increased by 30%? Dollars Percentage 30 % 30 % c. The difference in the increases of operating income is due to the difference in the operating leverages. Asha higher operating leverage means that its fixed costs are a smaller Inc.'s. percentage of contribution margin tha
Asha Inc. and Samir Inc. have the following operating data: Sales Variable costs Contribution margin Fixed costs Asha Inc. $2,500,000 (1,500,000) $1,000,000 (800,000) $200,000 Asha Inc. Samir Inc. Samir Inc. $4,000,000 (2,500,000) $1,500,000 (900,000) $600,000 Operating income a. Compute the operating leverage for Asha Inc. and Samir Inc. If required, round to one decimal place. Asha Inc. 150 75 Samir Inc. b. How much would operating income increase for each company if the sales of each increased by 30%? Dollars Percentage 30 % 30 % c. The difference in the increases of operating income is due to the difference in the operating leverages. Asha higher operating leverage means that its fixed costs are a smaller Inc.'s. percentage of contribution margin tha
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question

Transcribed Image Text:Asha Inc. and Samir Inc. have the following operating data:
Sales
Variable costs
Contribution margin
Fixed costs
Asha Inc.
$2,500,000
(1,500,000)
$1,000,000
(800,000)
$200,000
Asha Inc.
Samir Inc.
Samir Inc.
$4,000,000
(2,500,000)
$1,500,000
(900,000)
$600,000
Operating income
a. Compute the operating leverage for Asha Inc. and Samir Inc. If required, round to one decimal place.
Asha Inc.
150
75
Samir Inc.
b. How much would operating income increase for each company if the sales of each increased by 30%?
Dollars
Percentage
30 %
30 %
c. The difference in the increases
of operating income is due to the difference in the operating leverages. Asha Inc.'s
higher operating leverage means that its fixed costs are a smaller
Inc.'s.
percentage of contribution margin than are Samir
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