Answered: Operating leverage measures the: 1.…

Operating leverage measures the: 1. Change in profit when sales changes 2. change in contrribution when sales changes 3. change in BEP when fixed cost changes 4. change in BEP when sales changes

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 6MCQ: The use of fixed costs to extract higher percentage changes in profits as sales activity changes...

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Question

Operating leverage measures the:

1. Change in profit when sales changes

2. change in contrribution when sales changes

3. change in BEP when fixed cost changes

4. change in BEP when sales changes

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Similar questions

The use of fixed costs to extract higher percentage changes in profits as sales activity changes involves a. margin of safety. b. unit contribution margin. c. degree of operating leverage. d. sensitivity analysis. e. variable cost reduction.
Operating leverage measures the: O Change in profit when sales changes. O Change in Contibution when sales changes. O Change in BEP when fixed cost changes. O Change in BEP when sales changes.
Profitability changes may be simply calculated by using what kind of tool: sales price/volume/variable costs/fixed costs.
On a cost-volume-profit graph, when the Total Cost line is higher than the Total Revenue line, the difference represents Select one: O A. a positive return on the investment O B. a net loss O C. net income O D. not enough information is presented
1. Which of the following shows the degree of operating leverage? The percentage change in the sales volume as the result of the percentage change in cost of the goods sold The percentage change in the net income as the result of the percentage change in the variable costs The percentage change in the sales volume as the result of the percentage change in the sales price The percentage change in the net inome as the result of the percentage change in the sales volume The percentage change in the operating income as the result of the percentage change in the sales volume
Below is the information on a project that you are evaluating for deciding on its worthiness as an investment. ABC company is considering a new investment whose data are shown below. WACC for the project under consideration Net investment in fixed assets (immediate) Required new working capital (immediate) Working capital from the end of the first year onwards as a Percentage of Sales Straight line deprec. Rate (every year end from the end of year 1} Sales revenues (starting at the end of year 1) Operating cost excluding depreciation, (starting at the end of year 1) 10% 75000 15000 25% 33.33% 75000 25000 Tax Rate Annual increase in Operating Costs each year from year 2 onwards Annual increase in Sales revenue from the end of the year 2 onwards Depreciation: Fixed assets to be fully depreciated in books using the straight line method over 4 years to zero Salvage value of the fixed assets at the end of the project life 35% 6% 9750
Contribution margin is a.the same as sales revenue b.the excess of sales over variable costs c.another term for volume in the "cost-volume-profit" analysis d.profit
3. Give an example of CVP and Compute BEP, Changes in Net Income, Margin of Safety, and Degree of Operating Leverage.
A Cost-Volume-Profit graph contains an "Area of Loss" and an "Area ofProfitability". Which of the following best explains the difference between thetwo points on the graph? A. The area of loss represents the difference between Sales and Variable Cost.B. The area of loss begins with the concept that fixed costs have to be recovered priorto sales contributing to profit.C. The area of profit represents the difference between Sales and Variable Cost.D. The area of profit begins with the concept that no company would have any level ofsales below the break-even point.
Which tool can be used to easily calculate the change in profit resulting from a change in sales price, sales volume, variable costs, or fixed costs?
Which of the following would be considered as a limiting factor to maximize the profit? O a. Book value O b. Fixed cost Oc. Contribution d. Sales
Degree of operating leverage (DOL) measures the sensitivity of OCF in response to changes of The higher the DOL, the the volatility of a firm's operating income. Select one: a. sales quantity; lower O b. sales quantity; higher O c. fixed costs; lower O d. fixed costs; higher O e. variable costs; higher