Based on the Income Statements Shown Below,which Division Has the Cost

question 103

Multiple Choice

Based on the income statements shown below,which division has the cost structure with the highest operating leverage? $\begin{array}{c}\begin{array}{l}\\\text {Revenue}\\ \text {Variable costs}\\\text { Contribution margin }\\\text {Fixed costs}\\ \text {Net income}\\\end{array} \begin{array}{lll}\text { Soft Drinks }\\\$50,000\\(10,000) \\40,000\\(30,000) \\\%10,000 \end{array}\begin{array}{c}\text { Bottled Water }\\\$ 50,000 \\ (5,000) \\ 45,000 \\ (40,000) \\ \$ 5,000\end{array}\begin{array}{lll}\text { Fruit Juices }\\\$50,000\\(30,000) \\20,000\\(10,000) \\\$10,000\end{array}\end{array}$

• A) Bottled Water.
• B) Fruit Juices.
• C) Soft Drinks.
• D) The three divisions have identical operating leverage.

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Definitions:

Liable

Legally responsible or obligated.

Preponderance Of The Evidence

The standard of proof in civil cases, requiring that a claim is more likely to be true than not true.

Convicted

The legal finding that an individual is guilty of a criminal offense by a jury or judge.

Appeal

A legal process by which a higher court is asked to review the decision of a lower court.