Based on the Income Statements of the Three Following Retail

question 131

Multiple Choice

Based on the income statements of the three following retail businesses,which company has the highest operating leverage? $$\begin{array} { | l | r | r | r | } \hline & { \text { Alpha Company } } & { \text { Beta Company } } & \text { Gamma Company } \\\hline \text { Revenue } & \$ 200,000 & \$ 200,000 & \$ 200,000 \\\hline \text { Variable costs } & ( 95,000 ) & ( 155,000 ) & ( 125,000 ) \\\hline \text { Contribution margin } & \$ 105,000 & \$ 45,000 & \$ 75,000 \\\hline \text { Fixed costs } & ( 80,000 ) & ( 20,000 ) & ( 50,000 ) \\\hline \text { Net income } & \$ 25,000 & \$ 25,000 & \$ 25,000 \\\hline\end{array}$$

• A) Alpha Company
• B) Beta Company
• C) Gamma Company
• D) They all have same operating leverage

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Definitions:

Reinforce

To strengthen a behavior by providing a consequence that increases the likelihood of the behavior being repeated.

Lever

A simple machine consisting of a rigid bar that pivots on a fixed point, used to transfer force and change the direction of force.

Variable Interval

Variable interval refers to a reinforcement schedule in which rewards are given after unpredictable time intervals, used in behavioral conditioning.

Reinforcement

In psychology, a process by which a stimulus increases the probability of a response through either positive or negative reinforcement.