Operating leverage can be defined as ability of firm to use fixed costs to generate better returns. Variable expenses are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa. Fixed expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period. Requirement a: Risks associated with operating leverage

Question

Want to see the full answer?

Answer 1

Question

Chapter 12, Problem 12.31C

To determine

Concept Introduction:

Operating leverage can be defined as ability of firm to use fixed costs to generate better returns.

Variable expenses are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement a:

Risks associated with operating leverage

To determine

Concept Introduction:

Operating leverage can be defined as ability of firm to use fixed costs to generate better returns.

Financial leverage can be defined as ability of firm to increase better returns and reduce cost of firm by paying lesser taxes.

Variable expenses are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement b:

Similarities and differences between operating and financial leverage

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Please Solve Question

Covered member’s independence is impaired with respect to an attest client. What is a covered member for a CPA? What are the sources of liability for an auditor who violates the rules of professional conduct in an audit engagement?

Monty Inc., a major retailer of high-end office furniture, operates several stores and is a publicly traded company. The company is currently preparing its statement of cash flows. The comparative statement of financial position and income stetement for Monty as at May 31, 2020, are as The rollowing is additional Informacon soous transectons cunne tie year shoes may sa, coat for Monty ancy which tohows arks. Plant assets costing $69,000 were purchased by paying $47,000 in cash and issuing 5,000 common shares. In order to supplement is casn, Monty Issued ,000 edditone common snares. Cash dividends of $35,000 were declared and paid at the end of the fiscal year create cashflow direct method statement

Answer 2

Question

Chapter 12, Problem 12.31C

To determine

Concept Introduction:

Operating leverage can be defined as ability of firm to use fixed costs to generate better returns.

Variable expenses are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement a:

Risks associated with operating leverage

To determine

Concept Introduction:

Operating leverage can be defined as ability of firm to use fixed costs to generate better returns.

Financial leverage can be defined as ability of firm to increase better returns and reduce cost of firm by paying lesser taxes.

Variable expenses are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement b:

Similarities and differences between operating and financial leverage

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 12, Problem 12.31C

To determine

Concept Introduction:

Operating leverage can be defined as ability of firm to use fixed costs to generate better returns.

Variable expenses are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement a:

Risks associated with operating leverage

To determine

Concept Introduction:

Operating leverage can be defined as ability of firm to use fixed costs to generate better returns.

Financial leverage can be defined as ability of firm to increase better returns and reduce cost of firm by paying lesser taxes.

Variable expenses are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement b:

Similarities and differences between operating and financial leverage

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 12, Problem 12.31C

To determine

Concept Introduction:

Operating leverage can be defined as ability of firm to use fixed costs to generate better returns.

Variable expenses are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement a:

Risks associated with operating leverage

To determine

Concept Introduction:

Operating leverage can be defined as ability of firm to use fixed costs to generate better returns.

Financial leverage can be defined as ability of firm to increase better returns and reduce cost of firm by paying lesser taxes.

Variable expenses are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement b:

Similarities and differences between operating and financial leverage

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 12, Problem 12.31C

To determine

Concept Introduction:

Operating leverage can be defined as ability of firm to use fixed costs to generate better returns.

Variable expenses are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement a:

Risks associated with operating leverage

To determine

Concept Introduction:

Operating leverage can be defined as ability of firm to use fixed costs to generate better returns.

Financial leverage can be defined as ability of firm to increase better returns and reduce cost of firm by paying lesser taxes.

Variable expenses are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement b:

Similarities and differences between operating and financial leverage

Answer 6

Chapter 12, Problem 12.31C

To determine

Concept Introduction:

Operating leverage can be defined as ability of firm to use fixed costs to generate better returns.

Variable expenses are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement a:

Risks associated with operating leverage

Answer 7

Chapter 12, Problem 12.31C

To determine

Concept Introduction:

Operating leverage can be defined as ability of firm to use fixed costs to generate better returns.

Variable expenses are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement a:

Risks associated with operating leverage

Answer 8

To determine

Concept Introduction:

Operating leverage can be defined as ability of firm to use fixed costs to generate better returns.

Financial leverage can be defined as ability of firm to increase better returns and reduce cost of firm by paying lesser taxes.

Variable expenses are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement b:

Similarities and differences between operating and financial leverage

Answer 9

To determine

Concept Introduction:

Operating leverage can be defined as ability of firm to use fixed costs to generate better returns.

Financial leverage can be defined as ability of firm to increase better returns and reduce cost of firm by paying lesser taxes.

Variable expenses are associated with the amount of goods produced or services provided. These vary directly with the production level i.e. company's variable cost increases as the production increases and vice-a-versa.

Fixed expenses do not vary with the level of production. They do not change with the amount of goods or services a company produces. They remain same even if the company does not produce any product or provide any service during an accounting period.

Requirement b:

Similarities and differences between operating and financial leverage

Answer 10

Expert Solution & Answer

Answer 11

Expert Solution & Answer

Answer 12

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 13

Ch. 12 - Prob. 12.1ME Ch. 12 - Prob. 12.2ME Ch. 12 - Prob. 12.3ME Ch. 12 - Prob. 12.4ME Ch. 12 - Prob. 12.5ME Ch. 12 - Prob. 12.6ME Ch. 12 - Exercise 12.7 LO 3 Cost classifications For each...Ch. 12 - Exercise 12.8 LO 3 Cost classifications For each...Ch. 12 - Prob. 12.9E Ch. 12 - Prob. 12.10E

Videos

Want to see the full answer?

Chapter 12 Solutions