cvp analysis- variation in salesunderstanding the

Question

CVP Analysis- variation in sales

Understanding the effects of operating leverage High Tech, Inc., and Old Time Co compete within the same industry and had the following operating results in 2008:

	High Tech	Old-time Co.
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:
A. Calculate the amount of operating incomes (or loss) that you would expect each firm to report in 2009 if sales were to
1) Increase by 20%
2) Decrease by 20%

1. Increase in Sales by 20%	High Tech	Old-time Co.
Sales.......................................................
Variable expenses.......................................
Contribution Margin....................................
Fixed expenses..........................................
Operating income.......................................

 

2. Decrease in Sales by 20%	High Tech	Old-time Co.
Sales.......................................................
Variable expenses.......................................
Contribution Margin....................................
Fixed expenses..........................................
Operating income.......................................