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  3. *p6.64b (lo 1, 2, 3, 6) the following cvp income s

*P6.64B (LO 1, 2, 3, 6) The following CVP income statements are available for Retro...

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Accounting

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*P6.64B (LO 1, 2, 3, 6) The following CVP income statements are available for Retro Company and Modern Company: Retro Company Modern Company Sales revenue $500,000 $500,000 Variable costs 300,000 100.000 Contribution margin 200,000 400,000 Fixed costs 140,000 340,000 Operating income $ 60,000 $ 60,000 Instructions a. Calculate the break-even point in dollars and the margin of safety ratio for each company. b. Calculate the degree of operating leverage for each company and interpret your results. c. Assuming that sales revenue increases by 25%, prepare a variable cost income statement for each company. d. Assuming that sales revenue decreases by 25%, prepare a variable cost income statement for each company. e. Discuss how the cost structure of these two companies affects their operating leverage and profitability

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