Contribution Margin Income Statements for Two Competing Companies Are Provided

question 94

Essay

Contribution margin income statements for two competing companies are provided below:
$\begin{array}{|l|l|l|}\hline &{\text { Yin Company }} & \text { Yang Company } \\\hline \text { Revenue } & \$ 750,000 & \$ 750,000 \\\hline \text { Less variable costts }&300,000&525,000 \\\hline \text { Contribution margin } &\$450,000&\$225,000\\\hline \text { Less fixed costs } &405,000&180,000\\\hline \text { Net income }&\$45,000&\$45,000\\\hline\end{array}$ Required:
1) Show each company's cost structure by inserting the percentage of the company's revenue represented by each item on the contribution income statement.2) Compute each company's magnitude of operating leverage.3) Using the operating leverage measures computed in requirement 2, determine the increase in each company's net income (percentage and amount) if each company experiences a 10 percent increase in sales.4) Assume that sales are expected to continue to increase for the foreseeable future, which company probably has more desirable cost structure? Why?

Grasp the significance of research methods in understanding negotiation behaviors.

Comprehend how first impressions and early experiences shape expectations in negotiation.

Understand how idiosyncratic deals are formed and their effectiveness based on worker negotiation.

Learn the role of fairness and its perceptions in negotiation outcomes.

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Definitions:

Sales

The exchange of goods or services for money, representing the primary source of revenue for most businesses.

Dividend Announcement

is a public declaration by a company of its intention to pay out earnings to its shareholders in the form of dividends.

Signaling Effect

A phenomenon where decisions made by a company send signals to the market about its future prospects or the value of its stock.

Shareholders

Individuals or entities that own shares in a corporation, giving them ownership interests in the company.