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14 August, 17:53

Forde Co. has an operating leverage of 4. Sales are expected to increase by 12% next year. Operating income is a. expected to increase by 4% b. expected to increase by 48% c. unaffected d. expected to increase by 3%

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  1. 14 August, 21:20
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    48%

    Explanation:

    Given that, Forde Co. has an

    Operating leverage = 4

    Sales are expected to increase by 12% next year.

    Hence,

    Increase in Operating Income:

    = Increase in Sales * Operating Leverage of a company

    = 12% * 4

    = 0.12 * 4

    = 0.48 or 48 percent

    Therefore, the operating income is expected to increase by 48%.
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