Which of the Following Calculations Can Be Used to Measure

question 89

Multiple Choice

Which of the following calculations can be used to measure a company's degree of operating leverage?

• A) Contribution margin / sales.
• B) Contribution margin / income.
• C) Sales / contribution margin.
• D) Sales /income.
• E) Sales / fixed costs.

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Definitions:

Net Income

The amount of earnings left after all expenses, including taxes and operating costs, have been subtracted from total revenue; a measure of company profitability.

Operating Expenses

These are costs associated with the day-to-day operations of a business, excluding direct production costs but including items like rent, utilities, and administrative salaries.

Periodic Inventory System

An accounting method where inventory levels and cost of goods sold are updated at specific intervals, rather than continuously.

Transactions

Financial events or exchanges between parties that have a monetary impact on the financial statements of a business.