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## Accounting

 Accounting Basics Cost Accounting Financial Accounting Managerial Accounting Auditing Taxation

problem: Understanding the effects of operating leverage High Tech, Company, & Old time firm compete with in the same industry & had the following operating results in 2008:

 High Tech Old-time Co. 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] Describe why an equal percentage (%) increase [or decrease] in sales for each firm would have such differing effects on operating income.

[B] Compute the ratio of contribution margin to operating income for each firm in 2008. [Suggestion:  Divide contribution margin by operating income.]

[C] Multiply the expected increase in sales of 20 percent for 2009 by the ratio of contribution margin to operating income for 2008 find outd in requirement F) for each company. [Suggestion:  Multiply your answer in requirement F by .2]

Cost Accounting, Accounting

• Category:- Cost Accounting
• Reference No.:- M922470

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