Question: a . Calculate the breakeven point for each firm in terms of revenue. b . What observations can you draw by examining the breakeven point
a Calculate the breakeven point for each firm in terms of revenue.
b What observations can you draw by examining the breakeven point of each firm given that they earned an equal amount of operating income on identical sales volumes in
c Calculate the amount of operating income or loss that you would expect each firm to report in if sales were to
Increase by
Decrease by
d Using the amounts computed in requirement c calculate the increase or decrease in the amount of operating income expected in from the amount reported in
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 Hint: Divide contribution margin by operating income.
g Multiply the expected increase in sales of for by the ratio of contribution margin to operating income for computed in requirement for each firm. Hint: Multiply your answer in requirement by
h Multiply your answer in requirement by the operating income of $ reported in for each firm.
i Compare your answer in requirement with your answer in requirement What conclusions can you draw about the effects of
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