Assume Sales Volume of 3,000 Units, Unit Variable Cost of $3

question 22

Short Answer

Assume sales volume of 3,000 units, unit variable cost of $3, fixed costs of $15,000. What is operating leverage? a. 60%
B) 37.5%
C) 20%
D) 62.5%
E) 1.6%

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Definitions:

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life evenly, resulting in equal depreciation expenses per year.

Fixed Asset Turnover Ratio

An efficiency ratio that measures a company's ability to generate net sales from its fixed-asset investments, such as property, plant, and equipment.

Asset Impairment Loss

A charge recognized when the carrying amount of an asset exceeds its recoverable amount, indicating the asset's value has declined.

Net Book Value

The value at which an asset is carried on a balance sheet, calculated as the original cost minus accumulated depreciation and impairment costs.