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Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $219,400 $585,000 Variable costs 88,000 351,000 Contribution margin $131,400 $234,000 Fixed costs 58,400 39,000 Income from operations $73,000 $195,000

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 Bryant Inc.'s.

User Notthehoff
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Answer:

Beck Inc. and Bryant Inc.

Beck Inc. Bryant Inc.

a. Operating leverage 0.4 0.1

b. Increase in income $19,710 (27%) $35,100 (18%)

c. The difference in the INCREASE of income from operations is due to the difference in the operating leverages. Beck Inc.'s HIGHER operating leverage means that its fixed costs are a HIGHER percentage of contribution margin than are Bryant Inc.'s.

Step-by-step explanation:

a) Data and Calculations:

Beck Inc. Bryant Inc.

Sales $219,400 $585,000

Variable costs 88,000 351,000

Contribution margin $131,400 $234,000

Fixed costs 58,400 39,000

Income from operations $73,000 $195,000

Total costs $146,400 $390,000

Operating leverage 1.8 1.2

Operating leverage = Contribution Margin/Income from operations

Increase in Sales by 15%

Beck Inc. Bryant Inc.

Sales $252,310 $672,750

Variable costs 101,200 403,650

Contribution margin $151,110 $269,100

Fixed costs 58,400 39,000

Income from operations $92,710 $230,100

Increase in income $19,710 (27%) $35,100 18%

User AlexKhymenko
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