Chapter 5 Discussion Topic

Chapter 5 Discussion Topic - $300,000 60 $100,000 20...

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I think that if all of the factors remain the same, Baker Company will realize the most rapid increase in net operating income. Because the company has higher fixed costs, the contribution margin ratio will be higher, causing profits to increase at a higher rate when there is also a sales increase. For example: Year 1 Income statement: Able Co. Baker Co. Amount % Amount % Sales $500,000 100 $500,000 100 Variable expenses
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Unformatted text preview: $300,000 60 $100,000 20 Contribution margin $200,000 40% $400,000 80% Fixed expenses $150,000 $350,000 Net Operating Income $50,000 $50,000 Year 2 Income statement: Able Co. Baker Co. Amount % Amount % Sales $600,000 100 $600,000 100 Variable expenses $360,000 60 $120,000 20 Contribution margin $240,000 40% $480,000 80% Fixed expenses $150,000 $350,000 Net Operating Income $90,000 $130,000...
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This note was uploaded on 03/28/2012 for the course ACTG 532 taught by Professor Haugland,jerry during the Spring '10 term at Chadron State College.

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