Which company has the lower breakeven

Assignment Help Accounting Basics
Reference no: EM132719327

Question: There are two companies, Sparky and Bear that are very similar. Their sales and operating income are the same as well as their operating income ratio, 10%. In addition, Sparky has a variable cost ratio of 30% and Bear has a variable cost ratio of 60%. Last, Sparky and Bear have fixed costs of $60,000 and $30,000, respectively.

Answer the following:

a) Which company has the lower breakeven? Higher breakeven?

b) Which company's operating income is more sensitive to sales volatility?

c) If sales increase by 25% what is the percentage change in operating income for both Sparky and Bear?

Reference no: EM132719327

Questions Cloud

Analyze communication challenges and decision-making process : Analyze communication challenges and the decision-making process to provide recommended solutions using professional communications.
What the annual rate of return expected on the machine is : A company is considering purchasing a machine. If the machine is purchased, what the annual rate of return expected on this machine is
Return on invested capital-tibbs inc : Tibbs Inc. had the following data for the year ending 12/31/20Y5: Net income = $300; Net operating profit after taxes (NOPAT) = $400; Total assets
Demonstrate what the present value of net cash flow is : A project with an initial investment of $66000 and a profitability index of 1.239 also has internal rate of return of 12%. The present value of net cash flow?
Which company has the lower breakeven : There are two companies, Sparky and Bear that are very similar. Their sales and operating income are the same as well as their operating income ratio, 10%.
Effective leadership and role of organizational culture : We examined the importance of communication systems (both informal and formal) to effective leadership and the role of organizational culture.
What is the formula to calculate the monthly payment : A business takes out a 10-year loan for $250,000 at 5.3% interest compounded monthly. What is the formula to calculate the monthly payment.
What is the cash payback period for pharoah company : The use of the new computer, net income will increase by $3000 a year. If depreciation expense is $1000 a year, the cash payback period is
Determine the investment cost for replacing the fixtures : Lifetime investment cost (in present value terms) to replace each HID fixture with LED $500. Determine the investment cost for replacing the 700 fixtures

Reviews

Write a Review

Accounting Basics Questions & Answers

  Calculate the value of the closing inventory

Calculate the value of the closing inventory using the (a) FIFO method (b) LIFO method (c) weighted average method.

  Calculate d truckings temporary excess of taxable income

D Trucking uses the accrual method of accounting. Below is a reconciliation. Calculate D Trucking's temporary excess of taxable income over book income.

  Perform impairment test and record any necessary write down

Bass Company last year purchased some machinery for $4,400,000. Perform the impairment test and record any necessary write down

  Free cash flow consequences of buying

What are the free cash flow consequences of buying the fabricator if the lease is a true tax lease? What are the free cash flow consequences of leasing the fabricator if the lease is a true tax lease?

  Computations and entries of prince corporation

Prince Corporation purchased 960,000 shares of Smithtown Corporation's common stock (an 80% interest) for 21,200,000 on January 1, 2006. The 2,000,000 excess of investment cost over book value acquired was allocated to goodwill-Calculate the balan..

  Problem based on shipping costs

Anaconda Mining Company shipped 9,000 tons of copper concentrate for $450,000 in March and 11,000 tons for $549,000 in April. Shipping costs for 12,000 tons to be shipped in May would be expected to be:

  Purchased equipment on account

Opened a bank account in the name of Hair It Is and deposited $20,000 of her own money in this account as her initial investment and purchased equipment on account (to be paid in 30 days) for a total cost of $4,800.

  Turnover ratios for accounts receivable and inventory

Determine Kens and Dens accounts receivable collection period ratio and the number of days' sales in ending inventory during 2000.

  Examine the information contained in the companys balance

examine the information contained in the companys balance sheet and income statement to answer the following

  Buzz inc has 8000 shares of 5 50 par cumulative preferred

buzz inc. has 8000 shares of 5 50 par cumulative preferred stock and 50000 shares of 3 par common stock outstanding. no

  Allocate the joint costs of production to each product

Assume that body and foot lotion could be sold at the split-off point for $3.00 and $3.20 per bottle, allocate the joint costs of production to each product

  Identify the key internal and external stakeholders

Identify the key internal and external stakeholders. What are the negative impacts that can happen if you do not follow the instructions of your supervisor

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd