What Percentage Change in Sales Occurs If Profits Increase by 3

question 41

Multiple Choice

What percentage change in sales occurs if profits increase by 3 percent when the firm's degree of operating leverage is 4.5?

• A)0.33 percent
• B)0.67 percent
• C)1.5 percent
• D)3.33 percent

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Definitions:

Variable Cost

Costs that change in proportion to the level of activity or volume produced, such as materials and labor costs.

Enterprise Product

A product designed specifically for organizational use to cater to the complexity and scale of enterprise requirements.

Profit-Volume Chart

A chart used to assist management in understanding the relationship between profit and volume.

Break-Even Point

The level of production or sales at which total costs equal total revenues, resulting in no net loss or gain.