The CVP income statements shown below are available for Armstrong Company and Contador Company. Sales Variable...

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The CVP income statements shown below are available for Armstrong Company and Contador Company. Sales Variable costs Contribu (b) Assuming that sales revenue increases by 10%, prepare a variable costing income statement for each company. Armstrong Com

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Answer 1

Answer #1

Degree of operating leverage for Armstrong Company = Contribution margin / Net income

= 255,000/100,000

= 2.55

Degree of operating leverage for Contador Company = Contribution margin / Net income

= 458,000/100,000

= 4.58

	Armstrong Company	Contador Company
Sales	553,300	553,300
Variable cost	272,800	49,500
Contribution Margin	280,500	503,800
Fixed cost	155,000	358,000
Net Income	$125,500	$145,800

Due to increase in sales by 10%, Variable cost will also increase by 10%.

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Answer 2

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