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 ? %
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 ? %
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 21E: Income statements for two different companies in the same industry are as follows: Required: 1....
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Question
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 | ? | % |
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