-The Degree of Combined Leverage Is:
A) 2

question 6

Multiple Choice

$\begin{array}{lr}\text { Sales }(75,000 \text { units }) & \$ 750,000 \\\text { Variable costs } & \underline{225,000} \\\text { Contribution margin } & 525,000 \\\text { Fixed manufacturing costs } & \underline{187,500}\\\text { Operating income } & 337,500 \\\text { Interest } & \mathbf{7 5 , 0 0 0} \\\text { Earnings before taxes } & 262,500 \\\text { Taxes (at } 31 \% \text { ) } & 81.375\\\text { Net income }&\$181,125\\\text { Shares outstanding }&15,000\end{array}$
-The Degree of Combined Leverage is:

• A) 2.1x.
• B) 1.9x.
• C) 2.9x.
• D) 2.0x.

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Definitions:

Industry Supply Curve

A graphical representation showing the total quantity of a good or service that producers in an industry are willing to supply at different price levels.

Cost Data

Information related to the expenses incurred in the production of goods or the provision of services.

Identical Firms

Identical firms are businesses within the same industry that produce and sell products or services that are very similar in nature, leading to direct competition.

Demand Curve

A graph that illustrates the connection between the cost of a product and the amount of the product buyers are ready to buy at various costs.