Question: PLEASE ANSWER THE QUESTIONS IN THE EXACT FORMAT LISTED AND SHOW ALL WORK FOR CALCULATIONS Arnold Vimka is a venture capitalist facing two alternative investment
PLEASE ANSWER THE QUESTIONS IN THE EXACT FORMAT LISTED AND SHOW ALL WORK FOR CALCULATIONS
Arnold Vimka is a venture capitalist facing two alternative investment opportunities. He intends to invest $1 million 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 years operations of the two firms he is considering and give him some business advice.
| Company Name | |||||||
| Larson | Benson | ||||||
| Variable cost per unit (a) | $ | 18.00 | $ | 9.00 | |||
| Sales revenue (8,300 units $31.00) | $ | 257,300 | $ | 257,300 | |||
| Variable cost (8,300 units a) | (149,400 | ) | (74,700 | ) | |||
| Contribution margin | $ | 107,900 | $ | 182,600 | |||
| Fixed cost | (24,400 | ) | (99,100 | ) | |||
| Net income | $ | 83,500 | $ | 83,500 | |||
Required
Use the contribution margin approach to compute the operating leverage for each firm.
If the economy expands in coming years, Larson and Benson will both enjoy a 11 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.)
If the economy contracts in coming years, Larson and Benson will both suffer a 11 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 increases, both revenue and variable cost will increase.)
Complete this question by entering your answers in the tabs below.
Required A
Required B
Required C
Use the contribution margin approach to compute the operating leverage for each firm. (Round your answers to 2 decimal places.)
|
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 11 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.) (Negative values should be indicated with a minus sign. Round Percentage change to 2 decimal places.)
show less
| |||||||||||||||||||||||||||||||||||||||||||||||||
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 11 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.) (Negative values should be indicated with a minus sign. Round Percentage change to 2 decimal places.)
show less
| |||||||||||||||||||||||||||||||||||||||||||||||||
Complete this question by entering your answers in the tabs below.
If the economy contracts in coming years, Larson and Benson will both suffer a 11 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.) (Negative values should be indicated with a minus sign. Round Percentage change to 2 decimal places.)
| |||||||||||||||||||||||||||||||||||||||||||||||||
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
Study Help