Chapter 11 Homework 3 Arnold Vimka is a venture capitalist facing two alternative investment opportunities. He intends to invest $1,000,000 in a start-up firm, He is nervous, however, about future economic volatility. He asks you to analyze the following financial data for the past year's operations of the two firms he is considering and give him some business advice 20 points eBook Print References Variable cost per unit (a) Sales revenue (8,900 units x $31.00) Variable cost (8,900 units x a) Contribution margin. Fixed cost Net income Required A Required B Required C Company Name Larson $ 19.00 $ 275,900 (169,100) $ 106,800 (24,300) $ 82,500 Required a. Use the contribution margin approach to compute the operating leverage for each firm. b. If the economy expands in coming years, Larson and Benson will both enjoy a 12 percent per year increase in sales, assuming that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Note: Since the number of units increases, both revenue and variable cost will increase.) c. If the economy contracts in coming years, Larson and Benson will both suffer a 12 percent decrease in sales volume, assuming that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage (Note: Since the number of units decreases, both total revenue and total variable cost will decrease.) Company Name Operating leverage Complete this question by entering your answers in the tabs below. Larson Saved Benson $9.50 $ 275,900 (84,550) $191,350 (108,850) $ 82,500 Use the contribution margin approach to compute the operating leverage for each firm. Note: Round your answers to 2 decimal places. Benson Help Save & Exit Subr Check my work

a. Use the contribution margin approach to compute the operating leverage for each firm. b. If the economy expands in coming years, Larson and Benson will both enjoy a 12 percent per year increase in sales, assurning that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Noter Since the number of units increases, both revenue and variable cost will increase.) c. If the economy contracts in coming years, Larson and Benson will both suffer a 12 percent decrease in sales volume, assuming that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage: (Note: Since the number of units decreases, both total revenue and total variable cost will decrease) Complete this question by entering your answers in the tabs below. If the econorny expands in coming vears, Larson and Benson will both enfoy a 12 percent per year increase in sales, assuming that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Note: Since the number of units increases, both revenue and variable cost will increase.) Note: Amounts to be deducted should be indicated with a minus sign. Enter "Variable cost per unit" and "Percentage change" amounts to 2 decimal places. Round all other answers to the nearest whole dolit armount. a. Use the contribution margin approach to compute the operating leverage for each firm. b. If the economy expands in coming years, Larson and Benson will both enjoy a 12 percent per year increase in sales, assuming that the seffing price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Note. Since the number of units increases. both revenue and variable cost will increase) c. If the economy contracts in coming years, Larson and Benson will both suffer a 12 percent decrease in sales volume, assuming that the selling price remains unchanged. Compute the change in net income for cach firm in dollar amount and in percentage. (Noter Since the number of units decreases, both fotal reventae and total wariable cost will decrease) Complete this question by entering your answers in the tabs below. If the economy contracts in coming Years, Larson and Benson wil both suffer a 12 percent decrease in sales volume, assuming that the selling pelce remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Note: Since the number of units decreases, both total revenue and total variable cost will decrease.) Note: Amounts to be deducted should be indicated with a minus sign. Enter "Variable cost per unit" and "Percentage change" amounts to 2 decimal places. Round all other answers to the nearest whole doliar amount