The Percentage Change in Earnings Before Interest and Tax (EBIT)

question 59

Multiple Choice

The percentage change in earnings before interest and tax (EBIT) associated with a given percentage change in sales is known as the _____.

• A) degree of financial leverage
• B) degree of total leverage
• C) degree of operating leverage
• D) degree of combined leverage
• E) degree of contribution margin leverage

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Definitions:

Direct Materials Variances

The difference between the actual costs of direct materials used in production and the standard or expected costs.

Fixed Overhead

Expenses that remain constant regardless of how much is produced or sold, including items like lease payments, wages, and insurance premiums.

Direct Labor

The wages or salaries paid to employees who are directly involved in manufacturing a product or providing a service.

Raw Material

Basic materials used in the production process to manufacture finished goods, essential components of production cost.