Exercise 21-25 (Algo) Computing and analyzing operating leverage LO A2 Hudson Company reports the following contribution...

Transcribed Image Text:

Exercise 21-25 (Algo) Computing and analyzing operating leverage LO A2 Hudson Company reports the following contribution margin income statement. HUDSON COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales (10,000 units at $225 each) Variable costs (10,000 units at $180 each) Contribution margin Fixed costs Income 1. Compute the company's degree of operating leverage. $ 2,250,000 1,800,000 $ 450,000 360,000 $ 90,000 2. If sales decrease by 5% in the next year, what will be the company's income? 3. Prepare a contribution margin income statement for the next year assuming sales decrease by 5%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare a contribution margin income statement for the next year assuming sales decrease by 5%. HUDSON COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales Variable costs Contribution margin Fixed costs Income 0 $ 0 Exercise 21-25 (Algo) Computing and analyzing operating leverage LO A2 Hudson Company reports the following contribution margin income statement. HUDSON COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales (10,000 units at $225 each) Variable costs (10,000 units at $180 each) Contribution margin Fixed costs Income 1. Compute the company's degree of operating leverage. $ 2,250,000 1,800,000 $ 450,000 360,000 $ 90,000 2. If sales decrease by 5% in the next year, what will be the company's income? 3. Prepare a contribution margin income statement for the next year assuming sales decrease by 5%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare a contribution margin income statement for the next year assuming sales decrease by 5%. HUDSON COMPANY Contribution Margin Income Statement For Year Ended December 31 Sales Variable costs Contribution margin Fixed costs Income 0 $ 0