A company has a 20% contribution margin ratio and a degree of operating leverage of 4. Its fixed costs are $15,000. Assume that sales go up by $30,000 or 30%. Then, the company’s profit will go up by:

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A company has a 20% contribution margin ratio and a degree of operating leverage of 4. Its fixed costs are $15,000. Assume that sales go up by $30,000 or 30%. Then, the company’s profit will go up by:

A. 6%
B. 80%
C. 120%
D. $7,200
E. $9,000

Answer: C

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