Beck Inc. and Bryant Inc. have the following operating data:__________.

Business

1 answer:

DiKsa [7]2 years ago

7 0

Answer:

a. Beck Inc. = 5.00 and Bryant Inc. = 2.50

b. Beck Inc. = $100,000 and 100% : Bryant Inc. = $150,000 and 50 %

c. True.

Explanation:

Degree of Operating Leverage shows, the times Earnings Before Interest and Tax (EBIT) would change as a result of a change in Sales contribution.

Degree of Operating Leverage = Contribution ÷ EBIT

Thus,

Beck Inc = $500,000 ÷ $100,000

= 5.00

Bryant Inc. = $750,000 ÷ $300,000

= 2.50

If Sales increased by 20% the effects on Incomes would be :

Beck Inc = 20% × 5.00

= 100%

= $100,000 × 100%

= $100,000

Bryant Inc.= 20% × 2.50

= 50 %

= $300,000 × 50 %

= $150,000

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