Question

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

	Beck Inc.		Bryant Inc.
Sales	$374,100		$1,122,000
Variable costs	(150,100)		(673,200)
Contribution margin	$224,000		$448,800
Fixed costs	(154,000)		(261,800)
Operating income	$70,000		$187,000

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 operating income increase for each company if the sales of each increased by 15%? If required, round answers to nearest whole number.

	Dollars	Percentage
Beck Inc.	$		%
Bryant Inc.	$		%

2. Break-even sales and sales to realize operating income

For the current year ended March 31, Cosgrove Company expects fixed costs of $555,000, a unit variable cost of $62, and a unit selling price of $92.

a. Compute the anticipated break-even sales (units).
units

b. Compute the sales (units) required to realize operating income of $129,000.
units

Answer 1

Answer with working notes is given below

a) Operating leverage Beck Inc. Contribution Operating profit $224,000 $70,000 Bryant Inc. Contribution Operating profit $448,800 1. 2.4 $187,000 b) Increase in Operating Income Increase Percentage $33,600 $67,320 36% Beck Inc Bryant Inc 48% Operating leverage Growth Increase in Operating Income % Increase in Operating Income Beck Inc. 3.2 A 15% B 48% AXB $33,600 ($70,000*48%) Operating leverage Growth Increase in Operating Income % Increase in Operating Income Bryant Inc. 2.4 A 15% B 36% AXB $67,320 ($187,000*36%) a) anticipated break-even sales (units). Units $555,000 Fixed Cost Contribution per unit 18,500 $30 Contribution per unit Selling price Variable cost Contribution per unit $30 b) Fixed Cost Operating Income Total Target $555,000 $129,000 $684,000 Units to realise Operating Income of $129,000 Units Total Target Contribution per unit $684,000 $30 22,800