The CVP income statements shown below are available for Billings Company and Bozeman Company.

The CVP income statements shown below are available for Billings Company and Bozeman Company.

Compute the degree of operating leverage for each company. (Round answer to 3 decimal places, e.g. 1.150.)
Billings Co. 2.13
Bozeman 3.47
Degree of Operation Leverage = Contribution margin / Net income
Billings Co.
$320,000 / 150,000 = 2.13
Bozeman Co.
$520,000 / 150,000 = 3.47
Assuming that sales revenue increases by 10%, prepare a variable costing income statement for each company.
Billings Co. Bozeman Co.
Sales …………… ………..$660,000* ….$660,000
Variable costs …… ……..308,000** …….88,000***
Contribution margin ……352,000 ……. .572,000
Fixed costs ………. ……. .170,000 …….. 370,000
Net income …………. ….$182,000 …….$202,000
*($600,000 x 10% + 600,000)
**($280,000 x 10% + 280,000)
***($80,000 x 10% + 80,000)

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