Based on the income statements shown below,which division has the cost s
A) Bottled Water.
B) Fruit Juices.
C) Soft Drinks.
D) The three divisions have identical operating leverage.

Question

Quizplus · Accepted Answer

Magnitude of operating leverage = Contribution margin ÷ Net income
Soft drinks: Magnitude of operating leverage = $40,000 ÷ $10,000 = 4.0
Bottled water: Magnitude of operating leverage = $45,000 ÷ $5,000 = 9.0
Fruit juices: Magnitude of operating leverage = $20,000 ÷ $10,000 = 2.0

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