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Cornerstones of Managerial Accounting 6th Edition by Maryanne Mowen,Don Hansen ,Dan Heitger
Edition 6ISBN: 978-1305103962Cornerstones of Managerial Accounting 6th Edition by Maryanne Mowen,Don Hansen ,Dan Heitger
Edition 6ISBN: 978-1305103962 Exercise 25
Break-Even Sales, Operating Leverage, Change in Income
Income statements for two different companies in the same industry are as follows:
Required:
1. Compute the degree of operating leverage for each company.
2. CONCEPTUAL CONNECTION Compute the break-even point in dollars for each company. Explain why the break-even point for Macduff is higher.
3. CONCEPTUAL CONNECTION Suppose that both companies experience a 30% increase in revenues. Compute the percentage change in profits for each company. Explain why the percentage increase in Macduff's profits is so much larger than that of Duncan.
Income statements for two different companies in the same industry are as follows:
Required:
1. Compute the degree of operating leverage for each company.
2. CONCEPTUAL CONNECTION Compute the break-even point in dollars for each company. Explain why the break-even point for Macduff is higher.
3. CONCEPTUAL CONNECTION Suppose that both companies experience a 30% increase in revenues. Compute the percentage change in profits for each company. Explain why the percentage increase in Macduff's profits is so much larger than that of Duncan.
Explanation
Verified
Verified
1.
Duncan
Contribution Margin = $75,0...
Cornerstones of Managerial Accounting 6th Edition by Maryanne Mowen,Don Hansen ,Dan Heitger
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