-The Degree of Operating Leverage Is:
A) 1

question 103

Multiple Choice

$\begin{array}{lr}\text { Sales }(75,000 \text { units }) & \$ 750,000 \\\text { Variable costs } & \underline{225,000} \\\text { Contribution margin } & 525,000 \\\text { Fixed manufacturing costs } & \underline{187,500}\\\text { Operating income } & 337,500 \\\text { Interest } & \mathbf{7 5 , 0 0 0} \\\text { Earnings before taxes } & 262,500 \\\text { Taxes (at } 31 \% \text { ) } & 81.375\\\text { Net income }&\$181,125\\\text { Shares outstanding }&15,000\end{array}$
-The Degree of Operating Leverage is:

• A) 1.43x.
• B) 1.56x.
• C) 3.33x.
• D) 2.22x.

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Definitions:

Simple Interest

Interest calculated only on the original principal, not on the accumulated interest from previous periods.

Maturity Value

The amount payable to an investor at the end of a debt instrument's life, including both the principal and the interest.

Promissory Note

A financial document in which one party promises in writing to pay a determinate sum of money to another, either at a fixed or determinable future time or on demand.

Return on Investment

A performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments.