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

---

Definitions:

AFC

Average Fixed Cost, which is the fixed costs of production divided by the quantity of output produced; a measure of economies of scale.

AVC

Average Variable Cost is the per-unit variable cost of production, which changes with the level of output.

Average Variable Cost

The cost per unit of output that varies directly with the volume of production, excluding fixed costs.

Average Total Cost

The sum expenses incurred in manufacturing, divided by the total units of production.