Based on the Income Statements of the Three Following Retail

question 83

Multiple Choice

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

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

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Definitions:

Restricted Areas

Zones within a workplace or public space that have limitations on access or use, typically for safety or security reasons.

Control Over Inventory

The processes and systems put in place by a business to ensure that its inventory is managed effectively and efficiently, preventing overstock and shortages.

Safeguarding Inventory

Strategies and practices aimed at protecting inventory from loss, theft, or damage.

Financial Statements

Reports that summarize the financial performance and position of a company, including the balance sheet, income statement, and statement of cash flows.