The Solemn Company Has an Operating Leverage of 2

question 79

Multiple Choice

The Solemn Company has an operating leverage of 2. Sales for the current year are $100,000 with a contribution margin of $50,000. Sales are expected to be $150,000 in next year. Operating income for the current year can be expected to increase by what amount over the previous year?

• A)$50,000
• B)$25,000
• C)200%
• D)40%

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Definitions:

Stockholder

An individual or entity that owns shares in a corporation, thus holding a portion of the company's ownership.

Dividends Received Deduction

A tax deduction available to corporations that receive dividends from related entities, aimed at mitigating the effects of multiple layers of taxation.

Domestic Corporation

A corporation that is registered and operates within its country of incorporation.

Dividend

A Dividend is a payment made by a corporation to its shareholders, usually derived from the company's profits.