A DFL (Degree of Financial Leverage)of 3

question 83

Multiple Choice

A DFL (degree of financial leverage) of 3.0 indicates that a 27% increase in EPS is the result of a(n) ____ increase in EBIT.

• A)81%
• B)3%
• C)9%
• D)6%

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Definitions:

Direct Materials Inventory

An account used to track the cost of raw materials not yet used in production.

Direct Labor Costs

Expenses that can be directly tied to the production of specific goods or services, such as wages of workers.

Indirect Labor

Labor costs not directly associated with the production of goods or services, but rather supporting roles like maintenance and supervision.

Factory Overhead

All indirect costs associated with manufacturing, excluding direct labor and direct materials costs.