The Following Information Is for Companies M and N for the Most

Multiple Choice

The following information is for Companies M and N for the most recent year: $$\begin{array} { l l l } & \text { Company M } & \text { Company N } \\\text { Sales } & \$ 500,000 & \$ 500,000 \\\text { Variable costs } & \$ 300,000 & \$ 200,000 \\\text { Fixed costs } & \$ 50,000 & \$ 150,000\end{array}$$ Based on this information,which of the following statements is incorrect?

A) N's magnitude of operating leverage is lower than M's.
B) N would suffer more than M from an equal drop in sales revenue.
C) N's cost structure carries greater risk and greater potential for profit.
D) If N's sales increased by 20%, its net income would increase by 40%.