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:
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High Tech
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Old-time Co.
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Sales.......................................................
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$2,100,000
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$2,100,000
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Variable expenses.......................................
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420,000
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1,260,000
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Contribution Margin....................................
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$1,680,000
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$840,000
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Fixed expenses..........................................
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1,470,000
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630,000
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Operating income.......................................
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$210,000
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$210,000
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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%
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1. Increase in Sales by 20%
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High Tech
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Old-time Co.
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Sales.......................................................
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Variable expenses.......................................
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Contribution Margin....................................
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Fixed expenses..........................................
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Operating income.......................................
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2. Decrease in Sales by 20%
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High Tech
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Old-time Co.
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Sales.......................................................
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Variable expenses.......................................
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Contribution Margin....................................
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Fixed expenses..........................................
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Operating income.......................................
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