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Lyte Darke

Price: $2.50


The following variable costing income statements are available for Lyte Company
and Darke Company.

  Lyte Company Darke Company
Sales   1,000,000  1,000,000
Variable costs   600,000  200,000
Contribution margin   400,000  800,000
Fixed costs  200,000  600,000
Net income  200,000  200,000

Instructions
(a) Compute the break-even point in dollars and the margin of safety ratio for each company.
(b) Compute the degree of operating leverage for each company
(c) Assuming that sales revenue increases by 30%, prepare a variable costing income
statement for each company.
(d) Assuming that sales revenue decreases by 30%, prepare a variable costing income
statement for each company

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