Illinois Tool Company's (ITC) Fixed Operating Costs Are $1,260,000 and Its

question 19

Multiple Choice

Illinois Tool Company's (ITC) fixed operating costs are $1,260,000 and its variable cost ratio (i.e., variable costs as a fraction of sales) is 0.70.The firm has $3,000,000 in bonds outstanding at an interest rate of 8 percent.ITC has 30,000 shares of $5 preferred stock and 150,000 shares of common stock outstanding.ITC is in the 50 percent corporate income tax bracket.Forecasted sales for next year are $9 million.What is ITC's degree of operating leverage at a sales level of $9 million?

• A)1.60
• B)3.0
• C)1.26
• D)1.875

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Definitions:

Epithelial

Referring to epithelium, a layer of cells covering the body surfaces, cavities, and organs, serving as a barrier and interface with the environment.

Metabolic Wastes

Substances left over from metabolic processes (like urea, carbon dioxide) that need to be excreted from the body.

Fluid Balance

The maintenance of the correct amount of fluid in the body, crucial for ensuring that cells function properly.

Urinary System

The body's drainage system for removing wastes and excess water; it includes the kidneys, ureters, bladder, and urethra.