A B D E F Problem 3 2 Riddle Inc. and Puzzle Inc. have the following operating data: 6 Riddle Inc. Puzzle Inc. 5 Sales $2,500,000 $3,800,000 Less Variable costs 1,000,000 1,200,000 3 Contribution margin $1,500,000 $2,600,000 Less Fixed costs 1,000,000 1,300,000 Operating income $500,000 $1,300,000 1 2 Required: 3 A.Compute the operating leverage for Riddle Inc. and Puzzle Inc. Round to one decimal place. 4 Hint: OL = CM/OI 5 Riddle Inc. Puzzle Inc. 6 OL 7 8 B. How much would operating income increase for each company if the sales of each increased by 20%? 19 0 Riddle Inc. Puzzle Inc. 1 Income increase in % 2 Income increase in $ = NI x Income increase % 3 4 C. Why the percentage increase in Net Income in Riddle Inc is higher than that of Puzzle Inc.? 5 6. Answer: 7 8 19 0 1 2