ompare the following two companies: Company A is a retail merchandise firm with current sales of $4,000,000 and a 45% contribution margin. Company A's fixed costs are $600,000. Company B is a service firm with current service revenue of $2,800,000 and a 15% contribution margin. Company B’s fixed costs are $375,000. The following names are to be considered when completing this problem: Operating Income Variable Costs Sales Fixed Costs per Unit Selling Price per Unit Variable Cost per Unit Contribution Margin Fixed Costs Operating Loss 1. Based on the information given, prepare a complete contribution margin income statement for Company A: Company A Contribution Margin Income Statement Projected 2. Based on the information given, prepare a complete contribution margin income statement for Company B: Company B Contribution Margin Income Statement Projected 3.Compute the degree of operating leverage for both companies: NOTE: Your answers are to be rounded to two decimal places. Company A Company B 4. Which company will benefit most from a 15% increase in sales? NOTE: Your answer is either "A" or "B
ompare the following two companies: Company A is a retail merchandise firm with current sales of $4,000,000 and a 45% contribution margin. Company A's fixed costs are $600,000. Company B is a service firm with current service revenue of $2,800,000 and a 15% contribution margin. Company B’s fixed costs are $375,000. The following names are to be considered when completing this problem: Operating Income Variable Costs Sales Fixed Costs per Unit Selling Price per Unit Variable Cost per Unit Contribution Margin Fixed Costs Operating Loss 1. Based on the information given, prepare a complete contribution margin income statement for Company A: Company A Contribution Margin Income Statement Projected 2. Based on the information given, prepare a complete contribution margin income statement for Company B: Company B Contribution Margin Income Statement Projected 3.Compute the degree of operating leverage for both companies: NOTE: Your answers are to be rounded to two decimal places. Company A Company B 4. Which company will benefit most from a 15% increase in sales? NOTE: Your answer is either "A" or "B
Chapter2: Building Blocks Of Managerial Accounting
Section: Chapter Questions
Problem 5EA: Rose Company has a relevant range of production between 10,000 and 25.000 units. The following cost...
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Compare the following two companies:
- Company A is a retail merchandise firm with current sales of $4,000,000 and a 45% contribution margin. Company A's fixed costs are $600,000.
- Company B is a service firm with current service revenue of $2,800,000 and a 15% contribution margin. Company B’s fixed costs are $375,000.
The following names are to be considered when completing this problem:
Operating Income | Variable Costs |
Sales |
Fixed Costs per Unit | Selling Price per Unit |
Variable Cost per Unit |
Contribution Margin | Fixed Costs |
Operating Loss |
1. Based on the information given, prepare a complete contribution margin income statement for Company A:
Company A
Contribution Margin Income Statement
Projected
2. Based on the information given, prepare a complete contribution margin income statement for Company B:
Company B
Contribution Margin Income Statement
Projected
3.Compute the degree of operating leverage for both companies:
NOTE: Your answers are to be rounded to two decimal places.
- Company A
- Company B
4. Which company will benefit most from a 15% increase in sales? NOTE: Your answer is either "A" or "B"
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