Below are income statements, from 2019 for two companies that compete against one another in the...

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Below are income statements, from 2019 for two companies that compete against one another in the same industry: Company 1 Company 2 Sales $150,000 $150,000 Variable Costs 60,000 15,000 Contribution Margin 90,000 135,000 Fixed Costs 50,000 95,000 Operating Income $40,000 $40,000 a.) One of the above companies manufacturers its own products, and the other company outsources its production. Which company manufacturers its own products? Explain your answer. b.) Calculate the degree of operating leverage for each company. c.) If a recession in 2020 results in 20% lower sales for the industry - and for each of company- which company is better positioned and why? Below are income statements, from 2019 for two companies that compete against one another in the same industry: Company 1 Company 2 Sales $150,000 $150,000 Variable Costs 60,000 15,000 Contribution Margin 90,000 135,000 Fixed Costs 50,000 95,000 Operating Income $40,000 $40,000 a.) One of the above companies manufacturers its own products, and the other company outsources its production. Which company manufacturers its own products? Explain your answer. b.) Calculate the degree of operating leverage for each company. c.) If a recession in 2020 results in 20% lower sales for the industry - and for each of company- which company is better positioned and why?

Answer rating: 100% (QA)

a Company 1 has higher variable costs 60000 vs 15000 indicating it manufacturers its own products wh... View the full answer