The magnitude of operating leverage for Forbes Corporation is 1.8 when sales are $200,000 and net income is $24,000.If sales increase by 5%,what is net income expected to be?
A) $25,200
B) $26,160
C) $24,667
D) $43,200

Question

Quizplus · Accepted Answer

The formula for calculating expected net income is:

Expected net income = Net income x (1 + % change in sales) x Operating leverage

Substituting the given values, we get:

Expected net income = 24,000 x (1 + 0.05) x 1.8
Expected net income = 26,160

Therefore, the answer is B.

The Magnitude of Operating Leverage for Forbes Corporation Is 1