Question
ACME, Inc. reported the following income statement for 2009: Sales $2,500,000 Variable Costs 900,000 Fixed Operating Costs 700,000 EBIT 900,000 Interest Expense 200,000 EBT 700,000
ACME, Inc. reported the following income statement for 2009:
| Sales | $2,500,000 |
| Variable Costs | 900,000 |
| Fixed Operating Costs | 700,000 |
| EBIT | 900,000 |
| Interest Expense | 200,000 |
| EBT | 700,000 |
| Taxes (30%) | 210,000 |
| Net Income | $490,000 |
| Earnings Per Share | $4.90 |
If ACME's sales next year increase by 20%, ACME's EBIT will increase
A) 20%, showing no operating leverage.
B) 20%, showing no financial leverage.
C) over 35%, due to operating leverage.
D) over 35%, due to operating leverage and financial leverage.
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Fundamentals of Cost Accounting
Authors: William N. Lanen, Shannon Anderson, Michael W Maher
6th edition
1259969479, 1259565408, 978-1259969478
