Stevens Company has a degree of operating leverage of 3.5 at a sales level of $1,200,000 and net income of

$200,000. If Stevens’ sales fall by 10%, Stevens can be expected to experience a:

(a) decrease in net income of $70,000.

(b) decrease in contribution margin of $7,000.

(c) decrease in operating leverage of 35%.

(d) decrease in net income of $175,000.

AppendixLO1