Operating leverageAsha Inc. and Samir Inc. have the following operating data:Asha Inc.SalesVariable costsContribution margin$220,400(88,400)$132,000(72,000)$60,000Samir Inc.Asha Inc.Samir Inc.$640,000(384,000)$256,000(95,000)$160,000Fixed costsOperating incomea. Compute the operating leverage for Asha Inc. and Samir Inc. If required, round to one decimal place.Asha Inc.Samir Inc.b. How much would operating income increase for each company if the sales of each increased by 20%? If required, round answers to nearest whole number.DollarsPercentage%9c. The difference in the increases ✔ of operating income is due to the difference in the operating leverages. Asha Inc.'s higherpercentage of contribution margin than are Samir Inc.'s.operating leverage means that its fixed costs are a larger

Operating leverage means the degree to which companies operating cost are fixed rather than…

Asha Inc. and Samir Inc. have the following operating data: Asha Inc. Sales $220,400 (88,400) $132,000 Asha Inc. Samir Inc. Samir Inc. Contribution margin Fixed costs Operating income a. Compute the operating leverage for Ashe Inc. and Samir Inc. If required, round to one decimal place. Asha Inc. Samir Inc. (72,000) $60,000 $640,000 (384,000) $256,000 (96,000) $160,000 b. How much would operating income increase for each company if the sales of each increased by 20%? If required, round answers to nearest whole number. Dollars Percentage c. The difference in the increases of operating income is due to the difference in the operating leverages. Asha Inc.'s higher percentage of contribution margin than are Samir Inc.'s. ✓operating leverage means that its fixed costs are a larger

Asha Inc. and Samir Inc. have the following operating data: Asha Inc. Sales $220,400 (88,400) $132,000 Asha Inc. Samir Inc. Samir Inc. Contribution margin Fixed costs Operating income a. Compute the operating leverage for Ashe Inc. and Samir Inc. If required, round to one decimal place. Asha Inc. Samir Inc. (72,000) $60,000 $640,000 (384,000) $256,000 (96,000) $160,000 b. How much would operating income increase for each company if the sales of each increased by 20%? If required, round answers to nearest whole number. Dollars Percentage c. The difference in the increases of operating income is due to the difference in the operating leverages. Asha Inc.'s higher percentage of contribution margin than are Samir Inc.'s. ✓operating leverage means that its fixed costs are a larger

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 9PB: Fire Company is a service firm with current service revenue of $900,000 and a 40% contribution...

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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%.
Are operating leverage Beck Inc. and Bryant Inc. have the following operating data back Inc. sales $180,400 variable cost $72,400 contribution margin equals $108,000 fixed cost $54,000 income from operations $54,000 compute the operating leverage for Beck Inc. question VE how much would income from operations increase if the sales were increased by 15%? Bryant Inc. data is sales equals $432,000 variable cost $259,200 contribution margin $172,800 fixed cost $28,800 Income from operations $144,000 compute the operating leverage for Bryant company question B. How much would income from the operations increase for the Bryant company if the sales were increased by 15%?
Operating Leverage Income statements for two different companies in the same industry are as follows: Trimax, Inc. Quintex, Inc. $400,000 $562,500 200,000 112,500 $200,000 $450,000 150,000 400,000 $50,000 $50,000 Sales Less: Variable costs Contribution margin Less: Fixed costs Operating income 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 40 percent increase in revenues. Compute the percentage change in profits for each company, Trimax Quintex
Operating Leverage Cartersville Co. reports the following data: Sales $455,200 Variable costs (250,400) Contribution margin $204,800 Fixed costs (146,300) Operating income $58,500 Determine Cartersville Co.’s operating leverage. Round your answer to one decimal place.
The sales and cost data for two companies in the transportation industry are as follows: X Company Y Company Amount Percent Amount Percent Sales $ 150,000 100.00 $ 150,000 100.00 Variable costs 90,000 60.00 45,000 30.00 Contribution margin 60,000 40.00 105,000 70.00 Fixed costs 34,200 70,250 Operating income (πB) $ 25,800 $ 34,750 X Company's degree of operating leverage (DOL) at the current sales volume level is calculated to be:
Operating Leverage Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $238,500 $728,000 Variable costs 95,700 436,800 Contribution margin $142,800 $291,200 Fixed costs 100,800 179,200 Income from operations $42,000 $112,000 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 income from operations increase for each company if the sales of each increased by 15%? If required, round answers to nearest whole number. Dollars Percentage Beck Inc. $____________ ______________ % Bryant Inc. $___________ ______________ %
Asha Inc. and Samir Inc. have the following operating data: Line Item Description Asha Inc. Samir Inc. Sales $216,800 $632,000 Variable costs (87,000) (379,200) Contribution margin $129,800 $252,800 Fixed costs (70,800) (94,800) Operating income $59,000 $158,000 a. Compute the operating leverage for Asha Inc. and Samir Inc. If required, round to one decimal place.Asha Inc. fill in the blank 1 of 2Samir Inc. fill in the blank 2 of 2 b. How much would operating income increase for each company if the sales of each increased by 15%? If required, round answers to nearest whole number. Company Dollars Percentage Asha Inc. $fill in the blank 3 fill in the blank 4% Samir Inc. $fill in the blank 5 fill in the blank 6% c. The difference in the fill in the blank 1 of 3 of operating income is due to the difference in the operating leverages. Asha Inc.'s fill in the blank 2 of 3 operating leverage means that its fixed costs are a fill in the blank 3 of 3…
Operating Leverage Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $325,700 $1,000,000 Variable costs 130,700 600,000 Contribution margin $195,000 $400,000 Fixed costs 120,000 200,000 Income from operations $75,000 $200,000 a. Compute the operating leverage for Beck Inc. and Bryant Inc. If required, round to one decimal place. Beck Inc. fill in the blank 1 Bryant Inc. fill in the blank 2 b. How much would income from operations increase for each company if the sales of each increased by 15%? If required, round answers to nearest whole number. Dollars Percentage Beck Inc. $fill in the blank 3 fill in the blank 4 % Bryant Inc. $fill in the blank 5 fill in the blank 6 % c. The difference in the of income from operations 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…
Degree of Operating Leverage The following sales and cost data (in thousands) are for twocompanies in the transportation industry:Company A Company BAmount Percent of Sales Amount Percent of SalesSales $100,000 100% $100,000 100%Variable costs 50,000 50 30,000 30Contribution margin $ 50,000 50% $ 70,000 70%Fixed costs 15,000 40,000Operating profit $ 35,000 $ 30,000Required1. Calculate the degree of operating leverage (DOL) for each company. If sales increase from the presentlevel, which company benefits more? How do you know?2. Assume that sales rise 10% in the next year but that everything else remains constant. Calculate thepercentage increase in profit for each company. Are the results what you expected? Explain.3. In what sense is DOL a measure of risk?
Operating Leverage Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $267,200 $871,000 Variable costs (107,200) (522,600) Contribution margin $160,000 $348,400 Fixed costs (110,000) (214,400) Operating income $50,000 $134,000 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 20%? 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.
U.S. Steal has the following income statement data: Units Sold Total Variable Costs Fixed Costs Total Costs Total Revenue Operating Income (Loss) 80,000 $ 160,000 $ 70,000 $ 230,000 $ 400,000 $ 170,000 100,000 200,000 70,000 270,000 500,000 230,000 The top row of the table has the beginning values and the bottom row of the table has the ending values. Compute the degree of operating leverage (DOL) based on the formula below. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. DOL = Percent change in operating income / Percent change in units sold Recompute DOL using the formula given below. There may be a slight difference due to rounding. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. DOL = Q(P − VC) / Q(P − VC) − FC Q represents beginning units sold (all calculations should be done at this level). P can be found by dividing total revenue by units sold. VC can be found by dividing total…
Operating Leverage Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $229,100 $589,500 Variable costs (91,900) (353,700) Contribution margin $137,200 $235,800 Fixed costs (88,200) (104,800) Operating income $49,000 $131,000 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 20%? If required, round answers to nearest whole number. Dollars Percentage Beck Inc. $ % Bryant Inc. $ %