Rapid increase in net operating income


Problem: Able Company and Baker Company are competing companies that sell a product at the same price. Both companies are operating above the break-even point and have similar total profits. Able Company's costs are mostly variable, whereas Baker Company's costs are mostly fixed. In a time of increasing sales which company will tend to realize the most rapid increase in net operating income? Explain your answer.

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Accounting Basics: Rapid increase in net operating income
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