Manchu Company Had Net Income of $140,000 and Interest Expense

question 63

Multiple Choice

Manchu company had net income of $140,000 and interest expense of $30,000. If the corporate tax rate was 30%, determine its Degree of Financial Leverage (DFL) .

• A) 1.00
• B) 1.05
• C) 1.10
• D) 1.15
• E) 1.20

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Definitions:

Process Costing

A costing method used when identical or similar goods or services are produced in mass quantities, assigning costs to units of product based on the process they go through.

Processing Departments

Specific areas or divisions within a manufacturing facility where distinct stages of production are carried out.

Cost Reconciliation

The process of matching and comparing costs from multiple sources of data to ensure consistency and accuracy in financial records.

Production Report

A document that summarizes the activities, outputs, and status of production processes within a specific period.