Question: Understanding effects of operating leverage High Tech, Company, & Old-time Co compete with in 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:
[1] Multiply your answer in requirement G) by the operating income of dollar 210,000 reported in 2008 for each firm.
[2] Compare and contrast your answer in requirement H with your answer in requirement D. What conclusions can you draw about the effects of operating leverage from the steps you performed in requirements F, G, & H?