Based on the Income Statements of the Three Following Retail

question 31

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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