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Problem 223A (Algo) Analyzing operating leverage L0 24 Arnold Vimka is a venture capitalist facing two alternative investment opportunities. He intends to invest $1,000,000 in a startup firm. He is nervous, however, about future economic volatility. He asks you to analyze the following nancial data for the past year's operations of the two firms he is considering and give him some business advice. Company Name Larson Benson Variable cost per unit (a) $ 21.00 $ 10.50 Sales revenue (8,600 units x $32.00) $ 275,200 $ 275,200 Variable cost (8,600 units X a) (180,600) (90,300) Contribution margin 5 94,600 $ 184,900 Fixed cost (24,500) (114,800) Net income 5 70,100 $ 70,100 Required a. Use the contribution margin approach to compute the operating leverage for each rm. 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 rm in dollar amount and in percentage. (Note: Since the number of units increases, both revenue and variable cost will increase.) . 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 rm in dollar amountand 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. Required A Required B Required C 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 rm in dollar amount and in percentage. (Note: Since the number of units increases, both revenue and variable cost will increase.) (Negative values should be indicated with a minus sign. Round \"Percentage change" to 2 decimal places.) Show IessA Variable cost per unit __II __I = 24): _I Sales revenue Variable cost Contribution margin Fixed cost Net income !! _I_I Percentage change Complete this question by entering your answers in the tabs below. Required A Required B Required 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 rm in dollar amount and in percentage. (Note: Since the number of units decreases, both total revenue and total variable cost will decrease.) (Negative values should be indicated with a minus sign. Round \"Percentage change" to 2 decimal places.) Show lessA Variable cost per unit Sales revenue Variable cost Contribution margin Fixed cost Net income Percentage change