Socket Inc. and Wrench Inc. have the following operating data:

a. Compute the operating leverage for Socket Inc. and Wrench Inc.
b. How much would income from operations increase for each company if the sales of each increased by 30%?
c. Why is there a difference in the increase in income from operations for the two companies?Explain.

Transcribed Image Text:

Socket Inc. Wrench Inc. Sales Variable costs Contribution margin Fixed costs Income from operations $1,200,000 750,000 450,000 300,000 150,000 $1,400,000 600,000 S 800,000 480,000 S 320.000