Alvarez Technologies Has Sales of $3,000,000

question 16

Multiple Choice

Alvarez Technologies has sales of $3,000,000. The company's fixed operating costs total $500,000 and its variable costs equal 60% of sales, so the company's current operating income is $700,000. The company's interest expense is
$500,000. What is the company's degree of total leverage (DTL) ?

• A) 6.0000
• B) 5.4150
• C) 5.7000
• D) 4.8870
• E) 5.1443

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Definitions:

Average Total Cost

The total cost of production divided by the total quantity produced, representing the average cost per unit of output.

Implicit Costs

The opportunity costs of using resources owned by the business for its operations, not directly paid out in cash.

Delivery Truck

A vehicle specifically designed for transporting goods from one location to another.

Income

The amount of money received over a period of time either as payment for work, goods, or services, or through investments.