Forde Co Has an Operating Leverage of 4

question 24

Multiple Choice

Forde Co. has an operating leverage of 4. Sales are expected to increase by 12% next year. Operating income is

• A) unaffected
• B) expected to increase by 3%
• C) expected to increase by 48%
• D) expected to increase by 4%

---

Definitions:

Insurance Premiums

Payments made to insurance companies to provide coverage for certain risks, such as property damage or liability.

Direct Costs

Expenses that can be directly attributed to the production of specific goods or services, such as raw materials and direct labor.

Liability Insurance

An insurance policy that provides protection against claims resulting from injuries and damage to people and/or property.

Merchandising Firm

A business that purchases finished goods for resale, making profit through the markup of those goods.