Question

operating Leverage Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $194,700 $497,000 Variable costs (78,100) (298,200) Contribution margin $116,600 $198,800 Fixed costs (63,600) (56,800) Operating income $53,000 $142,000 a. Compute the operating leverage for Beck Inc. and Bryant Inc. If required, round to one decimal place. Beck Inc. 2.2 Bryant Inc. 1.4 b. How much would operating income increase for each company if the sales of each increased by 10%? If required, round answers to nearest whole number. Dollars Percentage Beck Inc. х 22 ✓ % Bryant Inc. 14 ✓ % operating leverage means C. The difference in the increases that its fixed costs are a larger of operating income is due to the difference in the operating leverages. Beck Inc.'s higher percentage of contribution margin than are Bryant Inc.'s.

Answer 1

Increase in operating income = % increase in operating income * Original operating income

For Beck:

= 0.22 * 53000

= 11660

For Bryant

= 0.14 * 142000

= 19880