Your answer is partially correct. The single-column CVP income statements shown below are available for Armstrong Company and Contador Company. Sales Variable costs Contribution margin Fixed costs Net income Armstrong Armstrong Co. $500,000 240,000 260,000 160,000 $100,000 Contador (a1) Compute the degree of operating leverage for each company. (Round answers to 2 decimal places, e.g. 1.15.) Contador Co. Degree of Operating Leverage 2.6 4.5 $500,000 50,000 450,000 350,000 $100,000
Your answer is partially correct. The single-column CVP income statements shown below are available for Armstrong Company and Contador Company. Sales Variable costs Contribution margin Fixed costs Net income Armstrong Armstrong Co. $500,000 240,000 260,000 160,000 $100,000 Contador (a1) Compute the degree of operating leverage for each company. (Round answers to 2 decimal places, e.g. 1.15.) Contador Co. Degree of Operating Leverage 2.6 4.5 $500,000 50,000 450,000 350,000 $100,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Am. 121.
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Your answer is partially correct.
The single-column CVP income statements shown below are available for Armstrong Company and Contador Company.
Sales
Variable costs
Contribution margin
Fixed costs
Net income
Armstrong
Contador
Sales Revenue
Variable Costs
Armstrong Co.
Contribution Margin
Fixed Costs
$500,000
240,000
Degree of Operating Leverage
Net Income/(Loss)
260,000
160,000
$100,000
(a1) Compute the degree of operating leverage for each company. (Round answers to 2 decimal places, e.g. 1.15.)
$
Contador Co.
2.6
$
4.5
(b) Assuming that sales revenue increases by 10% (due to a 10% increase in the number of units sold), prepare a single-column CVP
income statement for each company.
$500,000
50,000
450,000
350,000
$100,000
Armstrong Company
$
Contador Company
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