Which of the Following Statements Is Most Likely True If

question 31

Multiple Choice

Which of the following statements is most likely true if Red Inc.has an operating leverage of 2.0 while Blue Corp.has an operating leverage of 1.4?

• A) Red Inc.is selling its products for a higher sales price than Blue Corp.
• B) Red Inc.'s net income will be less sensitive to a change in sale volume than Blue Corp.
• C) Blue Corp.'s fixed costs in relation to variable costs are lower than Red Inc.'s.
• D) Blue Corp.has a lower contribution margin per unit than Red Inc.

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Definitions:

Influence

Influence is the capacity to have an effect on the character, development, or behavior of someone or something, or the effect itself.

Perfectly Competitive Market

A perfectly competitive market is one in which there are many buyers and sellers, all of whom have complete market information, and where the goods being traded are identical, leading to one market price.

Incentive

A factor, monetary or otherwise, that motivates individuals or entities to act in a particular way or to pursue a certain course of action.

Advertise

The act of promoting products, services, or ideas through various media channels in order to attract or increase interest among consumers.