The Rocky Company Reports the Following Data: Sales

question 173

Multiple Choice

The Rocky Company reports the following data: Sales
$800,000
Variable costs
300,000
Fixed costs
120,000
Rocky Company's operating leverage is

• A) 6.7
• B) 2.7
• C) 1.0
• D) 1.3

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Definitions:

Variable Cost

Outlays that adjust in accordance with the volume of production or output, like materials and labor costs.

Loan

A sum of money that is borrowed and expected to be paid back with interest.

Economies of Scale

Refers to the cost advantage that arises with increased output of a product, leading to a reduction in the per-unit cost.

Marginal Cost

An alternative phrasing expressing the additional cost incurred from the production of the next unit of output.