Mariana Manufacturing and Bellow Brothers compete in the same industry and in all respects their products are virtually identical. However, most of Mariana’s costs are fixed while Bellow’s costs are primarily variable. If sales increase for both companies, which will realize the greatest increase in profits? Why?

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A: Explanation and answer is given below,

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A:

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A: we know that,  sales - variable cost = contribution

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A: Economic Profit: It is the profit after deducting opportunity cost from operating profit.

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A: Contribution = sales -  variable cost

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A:

Q: operating leverage factor t

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A: The answer is stated below:

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A: The correct answer is Option (b).