Adams, Inc. has sales of $100,000 with a contribution margin of $60,000 and net income of $20,000. Baron, Inc. has sales of $110

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2 years ago

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Adams, Inc. has sales of $100,000 with a contribution margin of $60,000 and net income of $20,000. Baron, Inc. has sales of $110

,000 with a contribution margin of $44,000 and net income of $22,000. Which of the following statements are correct? Multiple select question. If sales fall, Baron will experience a greater decrease in income than Adams. Baron's net income grows twice as fast as its sales. Adams has a higher degree of operating leverage than Baron.

Business

1 answer:

Morgarella [4.7K] · Answer 1 · 2023-08-22T08:16:58+03:00

The true statement is that Adams has a higher degree of operating leverage than Baron.

<h3>What is a operating leverage?</h3>

The cost-accounting formula is used to measures the degree a project can increase the operating income by increasing revenue.

Here, the degree of operating leverage is for Adams, Inc is <u>3</u> and for Baron, Inc. is 2.

Hence, the true statement is that Adams has a higher degree of operating leverage than Baron.

Therefore, the Option C is correct.