Question

Companies A and B are in the same industry and are identical except for cost structure. At a volume of 50,000 units, the companies have equal net incomes. At 60,000 units, Company A's net income would be substantially higher than B's. Based on this information, Multiple Choice Company B's cost structure has higher fixed costs than A's. Company A's cost structure has more variable costs than B's. At a volume of 50,000 units, Company A's magnitude of operating leverage was lower than B's. o Company A's cost structure has higher fixed costs than B's. o

Answer 1

Solution:

If at a volume of 50000 units, both companies have equal net income and at 60000 units, Company A's net income is substantially higher than B, it means "Company A's cost structure has higher fixed costs then B's"

Hence last option is correct.