Question - Using the information below, calculate the operating leverage for each firm:
|
|
James
|
Jordan
|
|
Sales
|
$2,000,000
|
$2,000,000
|
|
Variable Costs
|
1,000,000
|
400,000
|
|
Contribution margin
|
1,000,000
|
1,600,000
|
|
Fixed costs
|
800,000
|
1,400,000
|
|
Operating income
|
$200,000
|
$200,000
|
If the sales increase by 20%, with the variable cost per unit remaining constant and the fixed costs not changing, what will be the increase in operating income for each firm?