The Degree of Operating Leverage Depends on the Base Level

question 13

True/False

The degree of operating leverage depends on the base level of sales used as a point of reference. The closer the base sales level used is to the operating breakeven point, the greater the operating leverage.

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Definitions:

Work In Process

Inventory items that are in the production process but have not yet been completed or transformed into finished goods.

Conversion Costs

These are the combined costs of direct labor and manufacturing overhead that are incurred to convert raw materials into finished goods.

Equivalent Units

A concept used in cost accounting to express the amount of work done on unfinished goods in terms of completed units of output.

Labor

The work performed by humans that is used in the production of goods and services.