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:

FIFO

This inventory management and valuation method assumes that the oldest products are sold or used first; an acronym for "First In, First Out," detailing a specific approach to inventory and asset management.

Periodic Inventory System

An inventory accounting system where stock levels and cost of goods sold are calculated at the end of an accounting period, rather than being continuously updated.

Ending Inventory

The price of items for sale at the closing of a fiscal period.

Lower Of Cost

An accounting principle stating that inventory or other assets should be recorded at the lower of either the original cost or the current market value.