If a Firm's DOL Is 4

question 16

Multiple Choice

If a firm's DOL is 4.0 when its profit is $2,000,000 and its depreciation is $500,000, how much fixed cost does it have?

• A)$5,000,000
• B)$5,500,000
• C)$6,000,000
• D)$7,500,000

---

Definitions:

Direct Labor

The cost of wages for employees who are directly involved in producing a product or delivering a service.

Raw Material

The basic material from which a product is made, typically unprocessed or minimally processed substances used in manufacturing.

Direct Labor

Refers to the wages or salaries paid to workers directly involved in the production of goods or services.

Fixed Manufacturing Overhead

Indirect manufacturing costs that remain relatively constant regardless of the level of production, such as rent, insurance, and salaries of permanent staff.