Miller Company has an operating leverage factor of 5. Thus, an 8% change in ______ should result in a 40% change in ______. The respective amounts that change are:
A)net income; sales revenue.
B)sales revenue; net income.
C)variable cost; contribution margin.
D)fixed cost; net income.
E)variable cost; break-even sales.

Question

Quizplus · Accepted Answer

Operating leverage factor = % change in net income / % change in sales revenue
5 = % change in net income / 8%
% change in net income = 40%
Therefore, a 8% change in sales revenue (option B) should result in a 40% change in net income.

Miller Company Has an Operating Leverage Factor of 5