The CVP income statements of Shalom and Peace Company are available below. The two companies belong in the same manufacturing industry and coincidentally, both had the same operating income in 2022: Sales Variable costs Contribution margin Fixed costs Operating income Shalom Peace 500,000 500,000 300,000 180,000 200,000 320,000 120,000 240,000 80,000 80,000 Amounts must be in whole numbers. Example: 88,000 or (88,000) Format of percentages: 88% Format of units: 88,000 UNITS (in whole numbers, one space after the number of units) Words must be in capital letters. Format of degree of operating leverage: 88.88X (2 decimal places with X to indicate "times") 1 Which company has a higher degree of operating leverage? 2 What is the degree of operating leverage of your answer in number 1? Use the underlined company name in capital letters as your choice. Assume that the sales will increase by 15%: 3 Using your DOL, what is the percentage of increase in Peace Company's operating income? 4 Using your DOL, what is the percentage of increase in Shalom Company's operating income? Assume that the sales will decrease by 10%: 5 Using your DOL, what is amount of decrease in Peace Company's operating income? 6 Using your DOL, what is amount of decrease in Shalom Company's operating income?
The CVP income statements of Shalom and Peace Company are available below. The two companies belong in the same manufacturing industry and coincidentally, both had the same operating income in 2022: Sales Variable costs Contribution margin Fixed costs Operating income Shalom Peace 500,000 500,000 300,000 180,000 200,000 320,000 120,000 240,000 80,000 80,000 Amounts must be in whole numbers. Example: 88,000 or (88,000) Format of percentages: 88% Format of units: 88,000 UNITS (in whole numbers, one space after the number of units) Words must be in capital letters. Format of degree of operating leverage: 88.88X (2 decimal places with X to indicate "times") 1 Which company has a higher degree of operating leverage? 2 What is the degree of operating leverage of your answer in number 1? Use the underlined company name in capital letters as your choice. Assume that the sales will increase by 15%: 3 Using your DOL, what is the percentage of increase in Peace Company's operating income? 4 Using your DOL, what is the percentage of increase in Shalom Company's operating income? Assume that the sales will decrease by 10%: 5 Using your DOL, what is amount of decrease in Peace Company's operating income? 6 Using your DOL, what is amount of decrease in Shalom Company's operating income?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:The CVP income statements of Shalom and Peace Company are available below. The two
companies belong in the same manufacturing industry and coincidentally, both had the same
operating income in 2022:
Sales
Variable costs
Contribution margin
Fixed costs
Operating income
Shalom Peace
500,000 500,000
300,000 180,000
200,000
320,000
120,000
240,000
80,000
80,000
Amounts must be in whole numbers. Example: 88,000 or (88,000)
Format of percentages: 88%
Format of units: 88,000 UNITS (in whole numbers, one space after the number of units)
Words must be in capital letters.
Format of degree of operating leverage: 88.88X (2 decimal places with X to indicate "times")
1 Which company has a higher degree of operating leverage?
2 What is the degree of operating leverage of your answer in number 1? Use the underlined
company name in capital letters as your choice.
Assume that the sales will increase by 15%:
3 Using your DOL, what is the percentage of increase in Peace Company's operating income?
4 Using your DOL, what is the percentage of increase in Shalom Company's operating income?
Assume that the sales will decrease by 10%:
5 Using your DOL, what is amount of decrease in Peace Company's operating income?
6 Using your DOL, what is amount of decrease in Shalom Company's operating income?
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