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:

Recognizing Patterns

The capability of identifying regularities, structures, or specific arrangements within sets of data, often utilizing machine learning algorithms for analysis.

Duplication

The act or process of producing an exact copy of something.

Total Cost

The complete amount of money spent on the purchase of goods or services, including all related expenses.

Sensory Experiences

Interactions with the environment that involve stimulation of any of the senses, providing a subjective perceptual experience.