Question

QUESTION 27 When sales dollars increase, the net income of a company with a high degree of operating leverage will increase more quickly than in a company with a lower operating leverage. However, when sales dollars decrease, the net income of a company with a high degree of operating leverage will decrease more quickly than in a company with a lower operating leverage. True O False QUESTION 28 Jen & Berry's currently sells 100,000 pints of ice cream per month according to the following income statement: Per Unit S S 3.00 Total S S300,000 200,000 CONTRIBUTION MARGIN $ 100,000 50,000 S 50,000 SALES VARIABLE COSTS S 2.00 S 1.00 FIXED COSTS NET INCOME How many pints must be sold in a month at the breakeven point? 25,000 pints 50,000 pints 83,334 pints O none of the above are the correct breakeven units QUESTION 29 Contribution margin can be defined as: 1.the amount of sales revenue necessary to cover variable expenses. 2.sales revenue minus fixed expenses 3.the amount of sales revenue necessary to cover fixed and variable expenses. 4. sales revenue minus variable expenses.

Answer 1

Answers :

Question :27 True :

Operating Leverage is the ability of the firm to generate the EBIT( Operating income) with a change in Sale. Dollars.

High Degree of Operating Leverage ( DOL) : Change in Sale Dollar ( Increase Or Decrease) leads to Higher change in company Net Income .

Question : 28 50,000 Pints

Break Even point ( Units ) = Fixed Cost / Contribution Margin Per unit

Fixed cost = 50,000 Contribution Margin Per unit =$1

BEP (Units ) = 50,000/1 = 50,000 Pints

Question : 29 Sales Revenue Minus Variable Expense

Contribution Margin is the Difference Between the sales revenue and Variable Expenses

Contribution Margin = sale -variable Expenses