Please help, what are the answers to this question? Operating Leverage Beck Inc.

Question

Please help, what are the answers to this question?

Operating Leverage

Beck Inc. and Bryant Inc. have the following operating data:

a. Compute the operating leverage for Beck Inc. and Bryant Inc. If required, round to one decimal place.

b. How much would income from operations increase for each company if the sales of each increased by 20%? If required, round answers to nearest whole number.

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.

Beck Inc. Bryant Inc. Sales $425,900 $1,200,000 Variable costs 170,900 720,000 Contribution margin $255,000 $480,000 Fixed costs 180,000 280,000 Income from operations $75,000 $200,000

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer    Statementshowing Computations Paticulars Beck Inc. Bryant Inc. Sales        425,900.00     1,200,000.00 Less Variable Expenses      (170,900.00)      (720,000.00) Contribution Margin        255,000.00        480,000.00 Fixed cost      (180,000.00)      (280,000.00) Income from operations           75,000.00        200,000.00 Degree of operating leverage = Contribution / EBIT                     3.40                     2.40 If sales increase by 20%, income would incease by   68.00% 48.00% Increase in $ = NOI * Increase in income in %           51,000.00           96,000.00 The difference in the percentage 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.

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