Operating leverage Beck Inc. and Bryant Inc.have the following operating data: Beck Inc.Bryant Inc.Sales$1,250,000$2,000,000Variable costs750,0001,250,000Contribution margin $500,000 $ 750,000Fixed costs400,000450,000Income from operations $ 100,000 $300,000 a.Compute the operating leverage for Beck Inc.and Bryant Inc.b.How much would income from operations increase for each company if the sales of each increased by 20%?c.Why is there a difference in the increase in income from operations for the two companies? Explain.

Operating leverage is the one that is calculated to measure the level to which the income can be…

Answered: Operating leverage Beck Inc. and…

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

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Chapter1: Financial Statements And Business Decisions

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Operating leverage

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

	Beck Inc.	Bryant Inc.
Sales	$1,250,000	$2,000,000
Variable costs	750,000	1,250,000
Contribution margin	$500,000	$ 750,000
Fixed costs	400,000	450,000
Income from operations	$ 100,000	$300,000

a.Compute the operating leverage for Beck Inc.and Bryant Inc.

b.How much would income from operations increase for each company if the sales of each increased by 20%?

c.Why is there a difference in the increase in income from operations for the two companies? Explain.

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