hw_16sol

hw_16sol - Sales revenue $253,000 $462,000 Variable costs...

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Homework Problems Problem 16 A. Jeb = CM/Operating income = $230,000 - $110,000 = 2.40 50,000 George = CM/Operating income = $420,000 - $240,000 = 2.25 80,000 B. Jeb, because operating leverage is higher which indicates more risk due to the degree to which losses and profits will change as a result of a change in sales. C. Jeb George
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Unformatted text preview: Sales revenue $253,000 $462,000 Variable costs 121,000 264,000 Contribution margin 132,000 198,000 Fixed costs 70,000 100,000 Operating income $62,000 $98,000 Dollar increase in profit $12,000 $18,000 % increase in profit 24.00% 22.50% D. 30% x 2.25 = 67.50% decline in profits New profit = $80,000 - [67.50%*$80,000] = $26,000...
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