Consider the Following Information What Is the Anticipated Efficiency

question 42

Short Answer

Consider the following information: $$\begin{array} { l l } \text { Fixed Costs: } & \$ 15,000 \text { per year } \\\text { Variable Costs: } & \$ 1.00 \text { per unit } \\\text { Revenue: } & \$ 1.60 \text { per unit } \\\text { Design Capacity: } & 45,000 \text { units per year } \\\text { Effective Capacity: } & 40,000 \text { units per year } \\\text { Anticipated Output: } & 36,000 \text { units per year }\end{array}$$ What is the anticipated efficiency?

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Definitions:

Operating Leverage

A measure of how revenue growth translates into growth in operating income, highlighting the fixed versus variable costs of a business.

Variable Costs

Costs that change in proportion to the level of goods or services that a business produces.

Straight-Line Depreciation

A technique for distributing the expense of a physical asset evenly over its lifespan on an annual basis.

Sewing Machines

Mechanical or electromechanical devices used to stitch fabric and other materials together with thread.