Operating Leverage Measures

question 8

Multiple Choice

Operating leverage measures

• A) the effect of variable costs on the responsiveness of the firm's earnings before interest and taxes to changes in the level of sales.
• B) the effect of fixed operating costs on the responsiveness of the firm's earnings before interest and taxes to changes in the level of gross income.
• C) the effect of fixed operating costs on the responsiveness of the firm's earnings before interest and taxes to changes in the level of sales.
• D) none of the above.

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Definitions:

Wage Bill

the total amount of money paid by employers to their employees for work performed, typically within a specific period.

Wage Rate

The standard amount of compensation individuals receive in exchange for performing work or services, typically expressed per hour or year.

Profit-Maximizing Number

The output level at which a business achieves the highest possible profit, determined by analyzing costs and revenue functions.

Profit-Maximizing Firm

A business entity that seeks to achieve the highest possible profits through its operations and strategies.