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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.




Variable expenses



Contribution Margin



Fixed expenses



Operating income



[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]

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

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