Reference no: EM133056762
The following sales and cost data (in thousands) are for two companies in the transportation industry:
|
|
Company A
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Company B
|
|
|
Amount
|
Percent of Sales
|
Amount
|
Percent of Sales
|
|
|
Sales
|
$ 240,000
|
100%
|
$ 240,000
|
100%
|
|
Variable costs
|
120,000
|
50
|
72,000
|
30
|
|
Contribution margin
|
$ 120,000
|
50%
|
$ 168,000
|
70%
|
|
Fixed costs
|
21,600
|
|
62,600
|
|
|
Operating profit
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$ 98,400
|
|
$ 105,400
|
|
Required:
1-a. Calculate the degree of operating leverage (DOL) for each company.
1-b. If sales increase from the present level, which company benefits more?
2. Assume that sales rise 10% in the next year but that everything else remains constant. Calculate the percentage increase in profit for each company.
Lawn Master Company, a manufacturer of riding lawn mowers, has a projected income for the coming year as follows:
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Sales
|
|
$ 33,000,000
|
|
Operating expenses:
|
|
|
|
Variable expenses
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$ 26,400,000
|
|
|
Fixed expenses
|
3,300,000
|
|
|
Total expenses
|
|
29,700,000
|
|
Operating profit
|
|
$ 3,300,000
|
Required:
1. Determine the breakeven point in sales dollars.
2. Determine the required sales in dollars to earn a before-tax profit of $3,900,000. (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)
3. What is the breakeven point in sales dollars if the variable expenses increases by 12%? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.)