Gandee Company Has an Operating Leverage Factor of 5

question 90

Multiple Choice

Gandee Company has an operating leverage factor of 5. Which of the following statements is true?
Thus, an 8% change in ______ should result in a 40% change in ______. The respective amounts that change are:

• A) An 8% change in income should result in a 40% change in sales revenue.
• B) An 8% change in sales revenue should result in a 40% change in income.
• C) An 8% change in variable costs should result in a 40% change in contribution margin.
• D) An 8% change in fixed costs should result in a 40% change in income.
• E) An 8% change in variable costs should result in a 40% change in break-even sales.

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Definitions:

Schedule K-1

Schedule K-1 is a tax form used in the United States to report an individual's share of income, deductions, and credits from partnerships, S corporations, or trusts.

Schedule C

A tax form used by sole proprietors to report profit or loss from a business, detailing income, expenses, and net profit.

Royalty Income

Income received from the use of one's property or intellectual property (like patents, copyrights, literary works) by others, often as a percentage of revenues.

Deduct Expenses

The process of subtracting eligible costs from gross income, reducing the overall taxable income and, consequently, the amount of tax owed.