Understanding the effects of operating leverage
Understanding the effects of operating leverage,
HighTech, Inc.and OldTime Co. compete within the same industry and had the following operating results in 2010.,
Variable expenses.......... 420,000 1,260,000,
Contribution margin.......$1,680,000 $ 840,000,
Fixed expenses.............1,470,000 630,000,
a. Calculate the break-even point for each firm in terms of revenue.,
b. What observations can you draw by examining the break-even point of each firm given that they earned amount of operating income on identical sales volumes in 2010?,
c. Calculate the amount of operating income (or loss) that you would expect each firm to report in 2011 if sales were to,
1. Increase by 20%.,
2. Decrease by 20%.,
d. Using the amounts computed in requirement "c", calculate the increase or decrease in the amount of operating income expected in 2011 from the amount reported in 2010.,
e. Explain why an equal percentage increase (or decrease) in sales for each firm would have such differing effects on operating income.,
f. Calculate the ratio of contribution margin to operating income for each firm in 2010. (Hint: Divide contribution margin by operating income.),
g. Multiply the expected increase in sales of 20% for 2011 by the ratio of contribution margin to operating income for 2010 computed in requirement "f" for each firm. ,
(Hint: Multiply your answer in requirement "f" by 0.2.),
h. Multiply your answer in requirement "g" by the operating income of $210,000 reported in 2010 for each firm.,
i. Compare your answer in requirement "h" with your answer in requirement "d". What conclusions can you draw about the effects of operating leverage from the steps you performed in requirements "f", "g", and "h"?,
This question was answered on: Dec 18, 2020
Buy this answer for only: $18.50
This attachment is locked
We have a ready expert answer for this paper which you can use for in-depth understanding, research editing or paraphrasing. You can buy it or order for a fresh, original and plagiarism-free copy (Deadline assured. Flexible pricing. TurnItIn Report provided)
Pay using PayPal (No PayPal account Required) or your credit card . All your purchases are securely protected by .
About this QuestionSTATUS
Dec 18, 2020EXPERT
GET INSTANT HELP/h4>
We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.
You can also use these solutions:
- As a reference for in-depth understanding of the subject.
- As a source of ideas / reasoning for your own research (if properly referenced)
- For editing and paraphrasing (check your institution's definition of plagiarism and recommended paraphrase).
NEW ASSIGNMENT HELP?
Order New Solution. Quick Turnaround
Click on the button below in order to Order for a New, Original and High-Quality Essay Solutions. New orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.
WE GUARANTEE, THAT YOUR PAPER WILL BE WRITTEN FROM SCRATCH AND WITHIN YOUR SET DEADLINE.