A fiRm Is Reviewing a Project That Has fiXed Costs

question 14

Multiple Choice

A firm is reviewing a project that has fixed costs of $123,500, variable costs of $189,700, sales of $427,600, and a 34% marginal tax rate. The project has no initial cash requirements. What is the
Degree of operating leverage for this project?

• A) .61
• B) 1.22
• C) 1.61
• D) 1.64
• E) 2.64

Apply variance analysis to identify areas of financial performance that deviate from expected standards.

Learn the different types of variances, such as price, quantity, rate, and efficiency variances.

Develop skills in analyzing the implications of variances for managerial decision-making.

Understand the process of recognizing variances at different stages of production.

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Definitions:

Opportunity Cost

Turning down potential benefits from several alternatives by locking in on one.

College Degree

An academic degree conferred by colleges or universities upon students who have completed a course of study or major.

Lifetime Earnings

The total amount of money a person is expected to earn over the course of their career.

Marginal Cost

The charge incurred from the production of an extra unit of a product or service.