Question: Understanding effects of operating leverage High Tech, Corporation, and Old Time Company compete within the same industry & had the following operating results in 2008:
|
|
High Tech
|
Old Time
|
|
Sales........................................
|
$2,100,000
|
$2,100,000
|
|
Variable expenses.....................
|
420,000
|
1,260,000
|
|
Contribution Margin.........
|
$1,680,000
|
$840,000
|
|
Fixed expenses..................
|
1,470,000
|
630,000
|
|
Operating income..................
|
$210,000
|
$210,000
|
Required:
Compute the amount of operating incomes [or loss] that you would expect each firm to report in 2009 if sales were to
[A] Increase by 20 percent
[B] Decrease by 20 percent
|
|
High Tech
|
Old Time
|
|
Sales........................................
|
|
100%
|
|
100%
|
|
Variable expenses.....................
|
|
|
|
|
|
Contribution Margin.........
|
|
|
|
|
|
Fixed expenses..................
|
|
|
|
|
|
Operating income..................
|
|
|
|
|