Question: Varner Inc. and King Inc. have the following operating data: Varner Inc. King Inc. Sales $379,400 $1,235,000 Variable costs 152,200 741,000 Contribution margin $227,200 $494,000
Varner Inc. and King Inc. have the following operating data:
| Varner Inc. | King Inc. | |||
| Sales | $379,400 | $1,235,000 | ||
| Variable costs | 152,200 | 741,000 | ||
| Contribution margin | $227,200 | $494,000 | ||
| Fixed costs | 156,200 | 304,000 | ||
| Income from operations | $71,000 | $190,000 | ||
a. Compute the operating leverage for Varner Inc. and King Inc. If required, round to one decimal place.
| Varner Inc. | |
| King Inc. |
b. How much would income from operations increase for each company if the sales of each increased by 15%? If required, round answers to nearest whole number.
| Dollars | Percentage | ||
| Varner Inc. | $ | % | |
| King Inc. | $ | % | |
c. The difference in the of income from operations is due to the difference in the operating leverages. Varner Inc.'s operating leverage means that its fixed costs are a percentage of contribution margin than are King Inc.'s.
Step by Step Solution
There are 3 Steps involved in it
1 Expert Approved Answer
Step: 1 Unlock
Question Has Been Solved by an Expert!
Get step-by-step solutions from verified subject matter experts
Step: 2 Unlock
Step: 3 Unlock
Study Help