Operating LeverageBeck 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  $134,000  a.  Compute the operating leverage for Beck Inc. and Bryant Inc. If required, round to one decimal place.Beck Inc. Bryant Inc. b.  How much would operating income increase for each company if the sales of each increased by 20%? If required, round answers to nearest whole number. DollarsPercentageBeck Inc.$ %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.

Question
Asked Oct 24, 2019

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.

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Step 1
(a)
Compute the Operating Leverage for Beck Inc. and Bryant Inc,
Beck Inc
$160,000
$50,000
Particulars
Bryant Inc
$348,400
$134,000
Contribution Margin (C)
Operating income (O)
Operating Leverage (OL) = (C) / (O)
2.6
3.2
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(a) Compute the Operating Leverage for Beck Inc. and Bryant Inc, Beck Inc $160,000 $50,000 Particulars Bryant Inc $348,400 $134,000 Contribution Margin (C) Operating income (O) Operating Leverage (OL) = (C) / (O) 2.6 3.2

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Step 2
(b)
Compute the increase in the operating income
Bryant Inc.
Particulars
Beck Inc.
Operating Leverage (OL)
Sales percentage increased by (S)
Operating income (O)
3.2
2.6
20%
20%
$50,000
$134,000
Increase in the operating income (OL (S)x(O)
Percentage increase in the operating income
$32,000
64%
$69,680
52%
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(b) Compute the increase in the operating income Bryant Inc. Particulars Beck Inc. Operating Leverage (OL) Sales percentage increased by (S) Operating income (O) 3.2 2.6 20% 20% $50,000 $134,000 Increase in the operating income (OL (S)x(O) Percentage increase in the operating income $32,000 64% $69,680 52%

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