Operating leverage refers to the extent to which a company’s net income reacts to a given change in fixed costs. True Fa...
Operating leverage refers to the extent to which a company’s net income reacts to a given change in fixed costs.
True
False
Homework Answers
Answer-FALSE- Operating leverage refers to the extent to which a company’s net income reacts to a given change in fixed costs.
Explanation- Operating leverage refers to the degree to which a company's net income reacts to a change in sales.
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Operating leverage refers to the extent to which a company’s net income reacts to a given change in fixed costs. True Fa...
Which of the following statements regarding Operating Leverage is true? The degree of operating leverage is...
Which of the following statements regarding Operating Leverage is true? The degree of operating leverage is the same as the Margin of Safety percentage Organizations with high operating leverage incur more risk of loss when sales decline. The degree of operating leverage is the extent to which the cost function is made up of variable costs. Is measured as Earnings/Contribution Margin
Question 10 Which of the following is true about the degree of operating leverage? Operating leverage...
Question 10 Which of the following is true about the degree of operating leverage? Operating leverage is higher if fixed operating costs are high relative to variable operating costs Higher operating leverage increases the sensitivity of operating income to changes in sales Operating leverage magnifies both profits and losses, helping in the good times and causing pain in the bad times All of the above
Using the degree of operating leverage, what is the estimated percent increase in net operating income...
Using the degree of operating leverage, what is the estimated
percent increase in net operating income of a 5% increase in sales?
(Round your intermediate calculations and final answer to 2
decimal places.)
Assume that the amounts of the company’s total variable expenses
and total fixed expenses were reversed. In other words, assume that
the total variable expenses are $30,100 and the total fixed
expenses are $65,000. Under this scenario and assuming that total
sales remain the same, what is...
Saved Which of the following statements is true with respect to the degree of operating leverage...
Saved Which of the following statements is true with respect to the degree of operating leverage (DOL)? 8 Multiple Choice It is calculated as the ratio of contribution margin (CM) to operating Income, at each level of output For most firms, it is relatively constantin ount as sales volume changes. It provides a simple way to estimate the change in total fixed cost for a given change in sales volume. It is calculated as the amount of operating income where...
5. Given the following information, what is the degree of operating leverage? Sales: 100 Variable costs:...
5. Given the following information, what is the degree of operating leverage? Sales: 100 Variable costs: 20 Fixed costs:30 6. Given the info above, if sales change 20% how much will operating income change? 7. If the company has $900 in sales and $1,030 in sales in year 2, then operating income will change by what percentage if the DOL is 10?
Which of the following is true about the degree of operating leverage?
Question 10 Which of the following is true about the degree of operating leverage? Operating leverage is higher if fixed operating costs are high relative to variable operating costs Higher operating leverage increases the sensitivity of operating income to changes in sales Operating leverage magnifies both profits and losses, helping in the good times and causing pain in the bad times All of the above Question 12 What does the beta measure? unsystematic risk. systematic risk diversifiable risk company-specific risk Question 14 Why do we use Capital Asset Pricing Model (CAPM)? because it is...
A company with a completely fixed cost structure will have operating leverage of 1. True or...
A company with a completely fixed cost structure will have operating leverage of 1. True or False
Which of the following is true about the concept of leverage? O A. at the breakeven point, operating leverage is equal...
Which of the following is true about the concept of leverage? O A. at the breakeven point, operating leverage is equal to zero. O B. combined leverage measures the impact of operating and financial leverage on EBIT. O C. financial leverage measures the impact of fixed costs on earnings. OD. none of the above Reset Selection
1. What is the company’s degree of operating leverage? 2. Using the degree of operating leverage,...
1. What is the company’s degree of operating leverage?
2. Using the degree of operating leverage, estimate the impact
on net operating income of a 18% increase in sales.
3. Construct a new contribution format income statement for
the company assuming a 18% increase in sales.
Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income Amount $ 143.000 57,200 85,800 21,000...
13.What is the degree of operating leverage? 14.Using the degree of operating leverage, what is the...
13.What is the degree of operating leverage?
14.Using the degree of operating leverage, what is the
estimated percent increase in net operating income of a 5% increase
in sales?
15.Assume that the amounts of the company’s total variable
expenses and total fixed expenses were reversed. In other words,
assume that the total variable expenses are $8,400 and the total
fixed expenses are $21,000. Under this scenario and assuming that
total sales remain the same, what is the degree of operating...
Question 10 Which of the following is true about the degree of operating leverage? Operating leverage is higher if fixed operating costs are high relative to variable operating costs Higher operating leverage increases the sensitivity of operating income to changes in sales Operating leverage magnifies both profits and losses, helping in the good times and causing pain in the bad times All of the above
Using the degree of operating leverage, what is the estimated
percent increase in net operating income of a 5% increase in sales?
(Round your intermediate calculations and final answer to 2
decimal places.)
Assume that the amounts of the company’s total variable expenses
and total fixed expenses were reversed. In other words, assume that
the total variable expenses are $30,100 and the total fixed
expenses are $65,000. Under this scenario and assuming that total
sales remain the same, what is...
Saved Which of the following statements is true with respect to the degree of operating leverage (DOL)? 8 Multiple Choice It is calculated as the ratio of contribution margin (CM) to operating Income, at each level of output For most firms, it is relatively constantin ount as sales volume changes. It provides a simple way to estimate the change in total fixed cost for a given change in sales volume. It is calculated as the amount of operating income where...
Which of the following is true about the concept of leverage? O A. at the breakeven point, operating leverage is equal to zero. O B. combined leverage measures the impact of operating and financial leverage on EBIT. O C. financial leverage measures the impact of fixed costs on earnings. OD. none of the above Reset Selection
1. What is the company’s degree of operating leverage?
2. Using the degree of operating leverage, estimate the impact
on net operating income of a 18% increase in sales.
3. Construct a new contribution format income statement for
the company assuming a 18% increase in sales.
Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income Amount $ 143.000 57,200 85,800 21,000...
13.What is the degree of operating leverage?
14.Using the degree of operating leverage, what is the
estimated percent increase in net operating income of a 5% increase
in sales?
15.Assume that the amounts of the company’s total variable
expenses and total fixed expenses were reversed. In other words,
assume that the total variable expenses are $8,400 and the total
fixed expenses are $21,000. Under this scenario and assuming that
total sales remain the same, what is the degree of operating...
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