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Category > Accounting Posted 07 May 2017 My Price 6.00

Armstrong Company and Contador Company

E6-14 The CVP income statements shown below are available for Armstrong Company and Contador Company.

 

Armstrong Co.           Contador Co.

 

(LO 5), AN

Sales

 

$500,000

 

 

 

$500,000

 

 

Variable costs

 

240,000

 

 

 

50,000

 

 

Contribution margin

 

260,000

 

 

 

450,000

 

 

Fixed costs

 

160,000

 

 

 

350,000

 

 

Net income

 

$100,000

 

 

 

$100,000

 

 

 

 
 

 

Instructions

(a)   Compute the degree of operating leverage for each company and interpret your results.

(b)   Assuming that sales revenue increases by 10%, prepare a variable costing income statement for each company.

(c)   Discuss how the cost structure of these two companies affects their operating lever- age and profitability.

 

 

 
 

Answers

Alpha Geek
(8)
Status NEW Posted 07 May 2017 04:05 PM My Price 6.00

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Attachments

file 1494174334-Answer.docx preview (228 words )
E-----------6-1-----------4 -----------The----------- CV-----------P i-----------nco-----------me -----------sta-----------tem-----------ent-----------s s-----------how-----------n b-----------elo-----------w a-----------re -----------ava-----------ila-----------ble----------- fo-----------r A-----------rms-----------tro-----------ng -----------Com-----------pan-----------y a-----------nd -----------Con-----------tad-----------or -----------Com-----------pan-----------y. -----------  ----------- A-----------rms-----------tro-----------ng -----------Co.----------- Â----------- Â ----------- Â----------- Â ----------- Â----------- Â -----------  -----------Con-----------tad-----------or -----------Co.----------- ----------- (L-----------O 5-----------),Â----------- AN----------- Sa-----------les-----------  ----------- $5-----------00,-----------000-----------  -----------  -----------  ----------- $5-----------00,-----------000-----------  ----------- Â-----------  V-----------ari-----------abl-----------e c-----------ost-----------s Â-----------  2-----------40,-----------000-----------  -----------  -----------  ----------- 50-----------,00-----------0 Â-----------  -----------  -----------Con-----------tri-----------but-----------ion----------- ma-----------rgi-----------n Â-----------  2-----------60,-----------000-----------  -----------  -----------  ----------- 45-----------0,0-----------00 -----------  -----------  ----------- Fi-----------xed----------- co-----------sts-----------  ----------- 16-----------0,0-----------00 -----------  -----------  -----------  -----------350-----------,00-----------0 Â-----------  -----------  -----------Net----------- in-----------com-----------e Â-----------  $-----------100-----------,00-----------0 Â-----------  Â-----------  Â-----------  $-----------100-----------,00-----------0 Â-----------  -----------Ins-----------tru-----------cti-----------ons----------- (-----------a)Â----------- Â -----------
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