If Sales Increase from $80,000 Per Year to $120,000 Per

question 106

Multiple Choice

If sales increase from $80,000 per year to $120,000 per year, and if the operating leverage is 5, then net income should increase by?

• A)167%.
• B)250%.
• C)334%.
• D)100%.

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Definitions:

Total Costs

The sum of all costs associated with the production of goods or services, including fixed and variable costs.

Break Even

The point at which total costs and total revenue are equal, resulting in no net loss or gain for a business.

Meals

The portioned eating occasions in a day typically including breakfast, lunch, and dinner, and sometimes snacks, consisting of prepared food.

Cost Function

A mathematical relationship that describes how production costs change with changes in the volume of production.