If the Degree of Operating Leverage Is 4, Then a One

question 176

Multiple Choice

If the degree of operating leverage is 4, then a one percent change in quantity sold should result in a four percent change in:

• A) unit contribution margin.
• B) revenue.
• C) variable expense.
• D) net operating income.

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Definitions:

Profitability Order

A method of organizing projects or investments based on their profitability or expected return.

Current Profitability

Current profitability is a measure of a company's financial performance in the present, indicating the degree to which its revenues exceed its operational costs.

Variable Selling

Costs that vary directly with the level of sales activity, such as commissions or credit card fees.

Special Order

A customer order for goods or services that is outside a company's normal production or service offerings, often requiring unique specifications or quantities.