c. Compare the percentage change in revenues and percentage change in net income. Did you expect them to be similar? Do your calculations support your expectations? Explain.
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HighTech Inc. and OldTime Co. compete within the same industry and had the following operating results in 2019: HighTech Inc. OldTime Co. Sales $3,100,000 $3,100,000 Variable expenses $620,000 $1,860,000 Contribution margin $2,480,000 $1,240,000 Fixed expenses $1,990,000 $750,000 Operating income $490,000 $490,000 Required: A. Calculate the breakeven point for each firm in terms of revenue. B. What observations can you draw by examining the breakeven point of each firm given that they earned an equal amount of operating income on identical sales volumes in 2019? C. Calculate the amount of operating income (or loss) that you would expect each firm to report in 2020 if sales were to increase by 20%. Operating income (or loss) HighTech Inc. OldTime Co. Increase by 20% Operating income (or loss) HighTech Inc. $392,000 OldTime Co. $241,000 D. Using the amounts computed in requirement c, calculate the increase or decrease in the amount of operating income expected in 2020 from the amount reported in 2019. HighTech Inc. OldTime Co. Increase (Decrease) with 20% sales increase Increase (Decrease) with 20% sales decrease E. Explain why an equal percentage increase (or decrease) in sales for each firm would have such differing effects on operating income. F. Calculate the ratio of contribution margin to operating income for each firm in 2019. G. Multiply the expected increase in sales of 20% for 2020 by the ratio of contribution margin to operating income for 2019 computed in requirement f for each firm. HighTech Inc. % OldTime Co. H. Multiply your answer in requirement g by the operating income of $490,000 reported in 2019 for each firm. HighTech Inc. $ OldTime Co. $ I. Compare your answer in requirement h with your answer in requirement d. What conclusions can you draw about the effects of operating leverage from the steps you performed in requirements f, g, and h?
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Revenue and expense data for Young Technologies Inc. are as follows: Year 2 Year 1 Sales $500,000 $440,000 Cost of goods sold $325,000 $242,000 Selling expense $70,000 $79,200 Administrative expenses $75,000 $70,400 Income tax expense $10,500 $16,400 Required: a. Prepare an income statement in comparative form, stating each item for both years as an amount and as a percent of sales. Round percentage amounts to the nearest whole percent. Young Technologies Inc. Comparative Income Statement For the Years Ended December 31, Year 2 and Year 1 Year 2 Amount Year 2 Percent Year 1 Amount Year 1 Percent Sales $500,000 100% $440,000 100% Cost of goods sold $325,000 65% $242,000 55% Selling expense $70,000 14% $79,200 18% Administrative expenses $75,000 15% $70,400 16% Income tax expense $10,500 2% $16,400 4% Total expenses $480,500 96% $407,000 93% Net income $19,500 4% $33,000 7% b. Comment on the significant changes disclosed by the comparative income statement.
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(a) use the Midpoint Formula to estimate the revenue and profit of the company in 2003. (b) Then use your school’s library, the Internet, or some other reference source to find the actual revenue and profit for 2003. (c) Did the revenue and profit increase in a linear pattern from 2001 to 2005? Explain your reasoning. (d) What were the company’s expenses during each of the given years? (e) How would you rate the company’s growth from 2001 to 2005?
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