Ostler Company's net income last year was $10,000 and its contribution margin wa? $50,000. Using the operating leverage concept, if the company's sales increase next year by 8%, net income can be expected to increase by:

A) 20%.
B) 40%.
C) 16%.
D) 160%.

Operating Leverage

A measure of how sensitive net operating income is to a given percentage change in dollar sales.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from total revenue.

Contribution Margin

The difference between sales revenue and variable costs, indicating the contribution of sales to fixed costs and profits.