In Evaluating Degree of Operating Leverage , It Is Best

question 38

Multiple Choice

In evaluating degree of operating leverage , it is best that the firm's DOL is ____.

• A) higher than 1
• B) higher than 2
• C) lower than 1
• D) equal to 1

---

Definitions:

Variable Costing

An accounting method that includes only variable production costs—direct materials, direct labor, and variable manufacturing overhead—in product costs.

Fixed Manufacturing Overhead

The set costs associated with producing goods that do not change with the level of output, including salaries, rent, and insurance.

Net Operating Income

A financial metric that shows the profitability of a company's core business activities, excluding the effects of financing and investment income.

Segment Margin

The amount of profit or loss generated by a particular segment of a business, after accounting for traceable costs and expenses.