Ostler Company's net income last year was $10,000 and its contribution margin was $50,000.Using the operating leverage concept,if the company's sales increase next year by 8%,net income can be expected to increase by:

Question

Quizplus · Accepted Answer

Operating leverage is calculated as Contribution Margin / Net Income. Here, it is $50,000 / $10,000 = 5. An 8% increase in sales would lead to an 8% * 5 = 40% increase in net income.

Ostler Company's Net Income Last Year Was $10,000 and Its