Reference: 06-09
Prater Company Has Provided the Following Data -The Best Estimate of the Company's Variable Operating Expense Per

question 52

Multiple Choice

Reference: 06-09
Prater Company has provided the following data: $$\begin{array} { | l | l | l | } \hline & \text { This Year } & \text { Last Year } \\\hline \text { Units sold } & 300,000 & 250,000 \\\hline \text { Sales revenue } & \$ 1,300,000 & \$ 1,050,000 \\\hline \text { Less cost of goods sold } & 910,000 & 735,000 \\\hline \text { Gross margin } & 390,000 & 315,000 \\\hline \text { Less operating expenses } & 272,000 & 260,000 \\\hline \text { Net income } & \$ 118,000 & \$ 55,000 \\\hline\end{array}$$
-The best estimate of the company's variable operating expense per unit is

• A)$4.17.
• B)$0.91.
• C)$0.96.
• D)$0.24.

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Definitions:

Sale and Leaseback

A financial transaction where one sells an asset and leases it back for the long-term; thus, continuing to use the asset but no longer owning it.

Lessee

The party in a lease agreement who pays the lessor for the use of an asset or property.

Lessor

The owner of a property or asset that is rented or leased to another party, known as the lessee.

Financial Leverage

The use of borrowed funds to increase the potential return on investment, while also increasing the potential risk.