[The Following Information Applies to the Questions Displayed Below

question 25

Multiple Choice

[The following information applies to the questions displayed below.]

Darlington Company entered into the following business events during its first month of operations. The company uses the perpetual inventory system.

1) The company purchased $12,500 of merchandise on account under terms 2/10, n/30.
2) The company returned $1,200 of merchandise to the supplier before payment was made.
3) The liability was paid within the discount period.
4) All of the merchandise purchased was sold for $18,800 cash.

-What is the gross margin that results from these four transactions?

• A)$5,100
• B)$7,726
• C)$6,550
• D)$11,074

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Definitions:

Operating Leverage

A measure of how sensitive a company's operating income is to changes in revenue, indicating the degree of fixed versus variable costs.

Fiscal Policy

Government policies regarding taxation and spending to influence the economy.

Monetary Policy

The actions of a central bank, currency board, or other regulatory committee that determine the size and rate of growth of the money supply, which in turn affects interest rates.