Question

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

	Beck Inc.		Bryant Inc.
Sales	$182,400		$468,000
Variable costs	73,200		280,800
Contribution margin	$109,200		$187,200
Fixed costs	70,200		83,200
Income from operations	$39,000		$104,000

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 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 (increases, decreases) of income from operations is due to the difference in the operating leverages. Beck Inc.'s (higher, lower) operating leverage means that its fixed costs are a (larger, smaller) percentage of contribution margin than are Bryant Inc.'s.

Answer 1