please answer asap. CH 21 Q 78 Operating Leverage Beck Inc. and Bryant Inc. have

Question

please answer asap. CH 21 Q 78

Operating Leverage Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. $221,400 88,800 $132,600 81,600 $51,000 Bryant Inc. $612,000 367,200 $244,800 108,800 $136,000 Sales Variable costs Contribution margin Fixed costs Income from operations 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 income from operations increase for each company if the sales of each increased by 10%? If required, round answers to nearest whole number. Dollars Percentage Beck Inc Bryant Inc. c. The difference in the leverage means that its fixed costs are a of income from operations is due to the difference in the operating leverages. Beck Inc.'s percentage of contribution margin than are Bryant Inc.'s ? operating

Explanation / Answer

Operating Leverage Answer a Operating leverage = Contribution Margin / Income from operations Beck Inc. Bryant Inc. Contribution Margin $132,600.00 $244,800.00 / Income from operations $51,000.00 $108,800.00 Operating Leverage                  2.60                2.25 Answer b 10% increase in sales would result into (10% * operating leverage)% increase in income from operations. Beck Inc. Bryant Inc. % increase in sales 10% 10% x Operating leverage                2.60                2.25 % Increase in Income from Operations 26.00% 22.50% Increase in Income from Operations $13,260.00 $24,480.00 Answer c The difference in the % increase of Income from operations is due to the difference in the operating leverage. Beck Inc's high operating leverage means that its fixed costs are a high in percentage of contribution margin that are Bryant Inc's Margin of Safety Answer a Margin of safety = Actual sales - Break even sales Margin of safety (in dollars) = $680000 - $469200 = $2,10,800 Margin of safety (in %) = Margin of safety / Actual sales = $210800 / $680000 = 31% Answer b Contribution Margin % = 1 - Variable cost % = 1 - 0.55 = 0.45 i.e.45% Break even sales = Fixed cost / Contribution Margin % = $1400850 / 45% = $31,13,000 Margin of safety % = (Actual sales - break evens sales) / Actual sales Let us assume actual sales be x. 0.45 = (x - 3113000)/x 0.45x = x - 3113000 0.55x = 3113000 x = 5660000 Actual sales = $56,60,000

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