Question: Understanding effects of operating leverage High Tech, Company, & Old time Company compete within the same industry and had the following operating results in 2008:
|
|
High Tech
|
Old-time
|
|
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] Using the amounts calculated in requirement C) above, compute increase or decrease in the amount of operating income expected in 2009 from the amount reported in 2008.
|
|
High Tech
|
Old-time
|
|
1. Operating income reported in 2008
|
|
|
|
Expected operating income - 20 percent sales increase
|
|
|
|
Expected increase in operating income
|
|
|
|
2. Operating income reported in 2008
|
|
|
|
Expected operating income - 20 percent sales decrease
|
|
|
|
Expected decrease in operating income
|
|
|