Assume that two companies, Brake, Inc. and Carbo, Inc., have the following operating results:
|
Brake, Inc.
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Carbo, Inc.
|
|
Sales
|
$300,000
|
$300,000
|
|
Variable Costs
|
60,000
|
180,000
|
|
Fixed Costs
|
210,000
|
90,000
|
|
Operating Income
|
$30,000
|
$30,000
|
Required:
- Calculate the contribution margins for the two companies.
- Calculate the break-even point for each firm, in dollars and in units.
- Compare the two companies. What conclusions could you make regarding the use of operating leverage employed by the two firms?
- Assume that both companies experience an increase in sales by 15% next year. What would be the