Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $1,250,000 $2,000,000 Variable Cost 750,000 1,250,000 Contribution Margin 500,000 750,000 Fixed Cost 400,000 450,000 Income from Operation $100,000 $300,000 Compute the operating leverage for Beck Inc. and Bryant Inc. How much would income from operations increase for each company if the sales of each increased by 20%? Why is there a difference in the increase in income from operations for the two companies? Explain.
Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $1,250,000 $2,000,000 Variable Cost 750,000 1,250,000 Contribution Margin 500,000 750,000 Fixed Cost 400,000 450,000 Income from Operation $100,000 $300,000 Compute the operating leverage for Beck Inc. and Bryant Inc. How much would income from operations increase for each company if the sales of each increased by 20%? Why is there a difference in the increase in income from operations for the two companies? Explain.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
- Beck Inc. and Bryant Inc. have the following operating data:
|
|
Beck Inc. |
Bryant Inc. |
|
Sales |
$1,250,000 |
$2,000,000 |
|
Variable Cost |
750,000 |
1,250,000 |
|
Contribution Margin |
500,000 |
750,000 |
|
Fixed Cost |
400,000 |
450,000 |
|
Income from Operation |
$100,000 |
$300,000 |
- Compute the operating leverage for Beck Inc. and Bryant Inc.
- How much would income from operations increase for each company if the sales of
each increased by 20%?
- Why is there a difference in the increase in income from operations for the two
companies? Explain.
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