Below is an income statement for ABC Company for 2014:

Sales $300,000

Variable costs (150,000)

Contribution margin $150,000

Fixed costs (100,000)

Net Income $50,000

1) The degree of leverage (DOL) for ABC Company is equal to what amount?

A. 1.0 B. 2.0 C. 3.0 D. 4.0

2) Using the degree of leverage (DOL) that you just calculated in question #1, if ABC Company expects sales to decrease 20%, by how much will the net income decrease?

A. $10,000 B. $20,000 C. $30,000 D. $40,000