Question

If a co has a lower ratio of fixed to variable costs than another co, all things equal if sales for both increase 10% would the Co with the lower fixed cost's: expenses increase more rapidly, decrease while the others' increased, net income decrease, or net income increase? I think net income would increase more rapidly becasue that is where you make the profit...

Answer 1

As sales increase, the company with a higher fraction of FIXED costs would see total costs decrease by a lower factor, and net income rise by a larger factor, than the other company.