If fixed costs rise while other variables stay constant
A. the break-even point rises
B. the degree of operating leverage increases.
C. total profit declines.
D. All of the options are true.
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If a firm has fixed costs of $30,000, a variable cost per unit of $.75, and a break-even point of 5,000 units, the sales price per unit is _____.
A. $2.5
B. $6.75
C. $4.0
D. $4.5
A high degree of operating leverage means
A. there are high labor costs
B. there is high debt
C. there is a large amount of equity.
D. there are high fixed costs.
The degree of operating leverage is computed as
A. percent change in operating profit divided by percent change in net income.
B. percent change in unit volume divided by percent change in operating profit.
C. percent change in EPS divided by percent change in operating income.
D. percent change in operating income divided by percent change in unit volume.
Firms with a high degree of operating leverage are
A. easily capable of surviving large changes in sales volume.
B. usually trading off lower levels of risk for higher profits
C. significantly affected by changes in interest rates
D. trading off higher fixed costs for lower per-unit variable costs
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