Adams, Inc. has sales of $100,000 with contribution a contribution margin of $60,000 and net income of $20,000. Baron, Inc. has sales of $110,000 with a contribution margin of $44,000 and net income of $22,000. Thus, the degree of operating leverage is

Adams, Inc. has sales of $100,000 with contribution a contribution margin of $60,000 and net income of $20,000. Baron, Inc. has sales of $110,000 with a contribution margin of $44,000 and net income of $22,000. Thus, the degree of operating leverage is

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 23MC: If a firm has a contribution margin of $78M90 and a net income of $13,700 for the current month,...

See similar textbooks

Related questions

Q: ABC Corporation has the following information about its single product: Selling Price per unit ₱ 20…

A: Lets understand the basics. Degree of operative leverage indicates the change in net income if…

Q: Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $275,600…

A: From the provided image only Part B is incorrect , we are answering only part B.

Q: Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $355,700…

A: Operating leverage formula:-

Q: Singh Co. reports a contribution margin of $960,000 and fixed costs of $720,000. (1) Compute the…

A: Net income = Contribution margin - Fixed costs = $960,000 - $720,000 = $240,000

Q: A firm has the capacity to produce 931,498 units of a product each year. At present, it is operating…

A: Break-even sales are those level of sales at which the business does not make any profit nor does it…

Q: Bristo Corporation has sales of 1,000 units at $60 per unit. Variable expenses are 40% of the…

A: Financial Management: Financial management comprises of two words i.e. Finance and management.…

Q: Munna Corporation is a single-product company that expects the following operating results for next…

A: Total contribution margin = Sales*Contribution margin ratio Degree of operating leverage =…

Q: Each of two similar companies has sales of $20,000 and total costs of $15,000 for a month. Company…

A: Contribution Margin: It is defined as the difference between the sales and the variable cost. In…

Q: Frontier Corp. has a contribution margin of $1,458,000 and profit of $364,500. If sales increase…

A: Definition: Gross Profit: Gross Profit is the difference between the net sales and the cost of…

Q: HARDING COMPANY Income Statement For the Year Ended December 31, 2013 Sales (10,500 skates @…

A: Sales = $630,000 Variable cost = $262,500 Selling price per-unit = $60 Variable cost per-unit = $25

Q: Firm R has sales of 100,000 units at $2 per unit, variable operating costs of $1.70 per unit, and…

A: Operating Leverage = Contribution margin / Operating Income Finance leverage = Operating income /…

Q: Company A is a manufacturer with sales of $6,000,000 and a 60% contribution margin. Its fixed costs…

A: The degree of operating leverage (DOL) is a multiple that measures how much the operating income of…

Q: Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $315,600…

A: Formula: Percentage of change in profit = Degree of operating leverage x Increase in sales %

Q: Given the following financial data for Cosmos, compute the firm's degree of combined leverage.…

A: Combined leverage is a leverage combination of both operating and financial leverage. It refers to…

Q: Frontier Corp. has a contribution margin of $1,682,000 and profit of $336,400. What is its degree of…

A: Degree of operating leverage is one of the important ratio between contribution margin and net…

Q: TORT Company produced 40,000 units of product in 2020. Sales Revenue per unit was $20; variable cost…

A: The details are given of manufacturing company. Required 1. Contribution Margin Ratio 2. Operating…

Q: Jakara Company is a service firm with current service revenue of $400,000 and a 40% contribution…

A: In order to determine the degree of operating leverage, the contribution is required to be divided…

Q: Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $238,500…

A: Degree of Operating leverage: It is a financial ratio. Sensitivity of operating income to sales is…

Q: (1) Compute the company’s degree of operating leverage. (2) If sales increase by 15%, what amount of…

A: Contribution is usually defined as Sales minus the variable costs of an organization The degree of…

Q: Bulldogs Inc. has sales of P4,500,000, variable costs equal 75% of sales, and a fixed interest costs…

A: Answer) Formula: Degree of Combined Leverage = Contribution Margin/ Net Income Calculation of…

Q: A firm produces a single-product that expects the following results: Sales- ₱450,000; Contribution…

A: Operating leverage = Contribution margin / Net operating income Net income = Contribution margin /…

Q: Operating Leverage Income statements for two different companies in the same industry are as…

Q: The degree of operating leverage (DOL) is ___

A: Degree of Operating Leverage: It measures the change in the operating income in response to the…

Q: Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $1,250,000…

A: Beak Inc. Bryant Inc. Sales $12,50,000 $20,00,000 Variable costs -$7,50,000 -$12,50,000…

Q: a. Compute the operating leverage for Beck Inc. and Bryant Inc. If required, round to one decimal…

A: Leverage can be commonly measured into 3 kinds, namely Operating Leverage (OL) Financing Leverage…

Q: The statement of comprehensive income of Blanche Company for the current year is presented below…

A: Degree of operating leverage in the business shows how much operating income or income before taxes…

Q: Maverick Technologies has sales of $3,000,000. The company’s fixed operating costs total $543,418…

A: The degree of combines leverage shows the relationship between earning per share(EPS) and level of…

Q: A firm has the capacity to produce 599,374 units of a product each year. At present, it is operating…

A: Break-even point:- Break-even point is defined as the point on which the cost of production is equal…

Q: Based on the income statements shown below, which division has the cost structure with the highest…

A: FORMULA FOR OPERATING LEVERAGE - operating leverage = contribution margin / net operating income

Q: Porter Corporation has fixed costs of $500,000, variable costs of $32 per unit and a contribution…

A: Requirement a:

Q: A company can generate a maximum sales of 825,000 a year. The variable cost ratio to sales is 55%…

A: Variable cost ratio = 55% So. Contribution margin ratio = 45% Desired sales = (128,430 + 168,570)…

Q: a. Given the following graphs, calculate the total fixed costs, variable costs per unit, andsales…

A: Requirement a: Compute the variable cost per unit.

Q: New Berlin Corporation has annual fixed costs of $800,000, variable costs of $48 per unit, and a…

A: The contribution margin is calculated as difference between sales and variable costs. The…

Q: of $2,800,000 and a 15% contribution margin. Company B's fixed costs are $375,000. Compute the…

Q: Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales…

A: Operating leverage is a ratio of how of change in sales effect the change in operating income. It…

Q: Peterson Manufacturing is evaluating two different operating structures which are described below.…

A: answar 1.(x) EBIT and EPS in both the structures Operating structure 1 10000 units 20000 units…

Q: Company's sales are ₱600,000, its fixed expenses are ₱150,000, and its variable expenses are 60% of…

A: Solution: Degree of operating leverage is contribution margin divided by operating income.

Q: The following information relates to Day Company: Sales Revenue $12 000 000 Contribution Margin $ 4…

A: Operating leverage is the measure which is used to calculate the effect that how many times…

Q: . Compute the operating leverage for Beck Inc. and Bryant Inc. If required, round to one decimal…

Q: Harley Company has sales of $500,000, variable costs are 75% of sales, and income from operations is…

A: Operating leverage is a method of measuring the degree to which a firm can increase its operating…

Q: tandard Media has a required rate of return of 5 percent, a cost of capital of 4 percent, and an…

A: Return on investment(ROI) = Net Profit / Initial investment

Q: If selling price per unit is $30, variable costs per unit are $20, total fixed costs are $10,000,…

A: Net income - It is also known as net profit, it is the amount that is left after deducting all the…

Q: Operating Leverage Beck Inc. and Bryant Inc. have the following operating data: Beck Inc.…

Q: Maverick Technologies has sales of $3,000,000. The company’s fixed operating costs total $500,000…

A: Degree of financial leverage (DFL) = Earnings before interest and tax / earnings before tax

Q: Consider the following summary modified income statement for Tech Inc.: Sales $593,000 Variable…

A: Degree of operating leverage can be calculated by using this equation. Degree of operating…

Q: Company A has current sales of $4,000,000 and a 45% contribution margin. Its fixed costs are…

A: Degree of operating leverage (DOL): DOL Reflects an organization's variable and fixed cost…

Q: Bulldogs Inc. has sales of P4,500,000, variable costs equal 75% of sales, and a fixed interest costs…

A: Sales = P4,500,000 Variable cost = 75% Contribution = Sales*(1-Variable cost ratio)…

Q: Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $330,700…

A: Operating leverage is used by the organization to determine its break-even point. It helps the…

Question

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Introduction

VIEW

Analysis

VIEW

Answer

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Fire Company is a service firm with current service revenue of $900,000 and a 40% contribution margin. Its fixed costs are $200,000. Ice Company has current sales of $420,000 and a 30% contribution margin. Its fixed costs are $90,000. What is the margin of safety for Fire and Ice? Compare the margin of safety in dollars between the two companies. Which is stronger? Compare the margin of safety in percentage between the two companies. Now which one is stronger? Compute the degree of operating leverage for both companies. Which company will benefit most from a 10% increase in sales? Explain why. Illustrate your findings in an Income Statement that is increased by 10%.
If a firm has a contribution margin of $59,690 and a net income of $12,700 for the current month, what is their degree of operating leverage? A. 0.18 B. 1.18 C. 2.4 D. 4.7
Banyan Industries has two divisions, a tax rate of 30%, and a minimum rate of return of 20%. Division A has a weighted average cost of Capital of 9.5% and is looking at a new project that will generate a profit of $1,200,000 from a machine that costs $4,000,000. Division B has a weighted average cost of capital of 9.5% and is looking at a new project that will generate a profit of $1,350,000 from a machine that costs $5,000.000. A. Calculate the EVA for each of Banyans divisions. B. Calculate the RI for each of Banyans division. C. If Banyan uses EVA to evaluate the projects, which division has the better project and by how much? D. If Banyan uses RI, which division has the better project and by how much? E. What are some of the reasons for the similarity or difference that you found in the use of EVA versus RI?
If a firm has a contribution margin of $78M90 and a net income of $13,700 for the current month, what is their degree of operating leverage? 0.21 1.21 2.4 5.7
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.
Services Company's sales are ₱600,000, its fixed expenses are ₱150,000, and its variable expenses are 60% of sales. The DEGREE OF OPERATING LEVERAGE of its current operations is ₱_______________.
Maverick Technologies has sales of $3,000,000. The company’s fixed operating costs total $543,418 and its variable costs equal 60% of sales. The company’s interest expense is $500,000. What is the company’s degree of total leverage (DTL)?
Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $1,250,000 $2,000,000 Variable costs 750,000 1,250,000 Contribution margin $500,000 $750,000 Fixed costs 400,000 450,000 Income from operations $100,000 $300,000 a. Compute the operating leverage for Beck Inc. and Bryant Inc. If required, round to one decimal place. b. How much would income from operations increase for each company if the sales of each increased by 20%? If required, round answers to nearest whole number.
Peterson Manufacturing is evaluating two different operating structures which are described below. The firm has annual interest expense of $250, common shares outstanding of 1,000, and a tax rate of 40 percent. Fixed Cost Price per unit Variable cost per unit Operating Structure 1 $500 $1 $0.75 Operating Structure 2 $1200 $1 $0.70 1. For each operating structure, calculate x. EBIT and EPS at 10,000, 20,000, and 30,000 units. y. the degree of operating leverage (DOL) and degree of total leverage (DTL) using 20,000 units as a base sales level. z. the operating breakeven point in units. 2. Which operating structure has greater operating leverage and business risk? 3. If Peterson projects sales of 20,000 units, which operating structure is recommended?
Maverick Technologies has sales of $3,000,000. The company’s fixed operating costs total $500,000 and its variable costs equal 60% of sales, so the company’s current operating income is $700,000. The company’s interest expense is $492,284. What is the company’s degree of financial leverage (DFL)?
Company A is a manufacturer with sales of $6,000,000 and a 60% contribution margin. Its fixed costs equal $2,600,000. Company B is a consulting firm with service revenues of $4,500,000 and a 25% contribution margin. Its fixed costs equal $375,000. Compute the degree of operating leverage (DOL) for each company. Which company benefits more from a 20% increase in sales?
Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $290,900 $805,500 Variable costs (116,700) (483,300) Contribution margin $174,200 $322,200 Fixed costs (107,200) (143,200) Operating income $67,000 $179,000 a. Compute the operating leverage for Beck Inc. and Bryant Inc. If required, round to one decimal place. Beck Inc. Bryant Inc. b. How much would operating income increase for each company if the sales of each increased by 10%? If required, round answers to nearest whole number. Dollars Percentage Beck Inc. $ % Bryant Inc. $ % c. The difference in the of operating income is due to the difference in the operating leverages. Beck Inc.'s operating leverage means that its fixed costs are a percentage of contribution margin than are Bryant Inc.'s.