If a Company Sells 10,000 Units at $25 Each, Has

question 115

Multiple Choice

If a company sells 10,000 units at $25 each, has fixed costs of $20,000, and a variable cost of $20 per unit, what is its degree of operating leverage (DOL) ?

• A)1.67
• B)2.5
• C)2.0
• D)1.6

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Definitions:

FIFO

"First In, First Out," a method used in inventory management and accounting where the goods first added to inventory are the first to be sold.

Inventory Cost Formula

The method used to determine the cost of goods available for sale or the cost of goods sold, such as FIFO (First-In, First-Out), LIFO (Last-In, First-Out), or Average Cost.

Prior Writedown

A reduction in the book value of an asset when its market value falls below its current book value, previously accounted for in financial statements.