Which of the Following Offers the Most Plausible Scenario for a Firm

question 26

Multiple Choice

Which of the following offers the most plausible scenario for a firm that maintained a constant degree of operating leverage when its level of fixed costs doubled?

• A)depreciation expense increased
• B)variable cost percentage decreased
• C)sales revenues declined
• D)pretax profits decreased

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Definitions:

Equivalent Units

A concept used in cost accounting to indicate a quantity of finished goods that could have been produced given the amount of resources actually consumed during a period.

Managerial Accounting

The process of identifying, measuring, analyzing, interpreting, and communicating financial information to managers for the pursuit of an organization's goals.

Weighted Average Method

A costing method used to determine the average cost of inventory by weighting the cost of goods available for sale by the total units available.

Equivalent Units

A concept used in cost accounting to denote the amount of finished goods units that could have been produced given the total amount of direct materials, labor, and overhead costs incurred.