Two Sisters (Amy and Amanda) Aspired to Owning and Operating

question 17

Essay

Two sisters (Amy and Amanda) aspired to owning and operating companies in the same line of business. Amy believed in maintaining a very large, highly efficient manual labour force; Amanda, on the other hand, favored automated-production processes. One business was located in Brockville, Ontario and the other was located in Minto, New Brunswick. Recent data follow. $\begin{array} { lcc } & \text { Brockville } & { \text { Minto } } \\\text { Sales } & \$ 3,000,000 & \$ 3,000,000 \\\text { Contribution margin } & 2,800,000 & 1,500,000 \\\text { Net income } & 50,000 & 50,000\end{array}$ Required:
A. Which of the two businesses, Brockville or Minto, has the highest level of (1) variable cost and (2) highest level of fixed cost? Explain your answer.
B. Determine the probable owner of the firm located in (1) Brockville and (2) Minto. Briefly explain your answer.
C. Compute the operating leverage factor for Brockville and Minto.
D. Suppose that both Brockville and Minto had the opportunity to increase sales by 20%. Which of the two locations would experience a larger percentage change in net income? Why?

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Definitions:

Detrusor Muscle

A muscle of the urinary bladder wall that contracts during urination to release urine.

Internal Sphincter

A muscle that helps control the passage of substances and is not under voluntary control, such as the internal anal sphincter controlling the release of feces.

Urinary Retention

A medical condition characterized by the inability to completely empty the bladder, leading to discomfort and potentially serious health issues.

Diphenhydramine

An antihistamine drug used to relieve symptoms of allergy, hay fever, and the common cold, as well as for inducing sleep.