Companies A and B are in the same industry and are identical except for cost s
A) Company A's cost structure has more variable costs than B's.
B) Company A's cost structure has higher fixed costs than B's.
C) Company B's cost structure has higher fixed costs than A's.
D) At a volume of 50,000 units,Company A's magnitude of operating leverage was lower than B's.

Question

Quizplus · Accepted Answer

When sales change,the amount of the corresponding change in net income is directly influenced by the company's cost structure.The more fixed cost,the greater the fluctuation in net income.Since Company A's net income is substantially higher than Company B's when both companies experience an equal increase in sales,Company A has a fixed cost structure while Company B has a variable cost structure.

Companies a and B Are in the Same Industry and Are