You are analyzing Becker Corporation and Newton Corporation and have concluded that Becker has a higher operating leverage factor than Newton. Which one of the following choices correctly depicts (1) the relative use of fixed costs (as opposed to variable costs) for the two companies and (2) the percentage change in income caused by a change in sales?

Question

Quizplus · Accepted Answer

Choice A correctly depicts the situation where Becker Corporation has a higher operating leverage factor, which implies a higher relative use of fixed costs compared to variable costs. Additionally, a higher operating leverage factor indicates that a small percentage change in sales will cause a larger percentage change in income, which is depicted by the steeper slope of the Becker's income line compared to Newton's income line. Therefore, choice A is the best option.

You Are Analyzing Becker Corporation and Newton Corporation and Have