Operating Leverage May Be Defined as the Potential Use of Fixed

question 183

True/False

Operating leverage may be defined as the potential use of fixed operating costs to magnify the effects of changes in sales on a firm's earnings before interest and taxes (EBIT).

Analyze selling and administrative expenses within budgeting contexts.

Comprehend the calculation and implications of spending variances for specific cost categories.

Assess the impact of occupancy, facility, and supplies expenses on flexible budgets.

Evaluate revenue and expense variances in comparing actual results to budgeted figures.

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Definitions:

Potential Output

The maximum amount of goods and services an economy can produce when it uses its resources fully and efficiently, without causing inflation.

Net Taxes

The total taxes paid to the government minus transfer payments and subsidies received from the government.

Aggregate Demand

The total quantity of goods and services demanded across all levels of an economy at a given price level and in a given time period.

Potential Output

The peak level of real GDP that can be maintained in the long run without causing inflation to rise.