The Following Data Relate to a Company That Produces and Sells

question 100

Multiple Choice

The following data relate to a company that produces and sells a travel guide that is updated monthly:
$\begin{array} { | l | r | } \hline \text { Fixed costs: } & \\\hline \text { Copy editing } & \$ 6,000 \\\hline \text { Art work } & \$ 2,000 \\\hline \text { Typesetting } & \$ 72,000 \\\hline\end{array}$
$\begin{array} { | l | l | } \hline \text { Variable costs: } & \\\hline \text { Printing and binding } & \$ 3.20 \text { per copy } \\\hline \text { Bookstore discounts } & \$ 4.00 \text { per copy } \\\hline \text { Salespersons' commissions } & \$ 0.50 \text { per copy } \\\hline \text { Author's royalties } & \$ 2.00 \text { per copy }\\\hline \end{array}$ Each book sells for $20.00. The company sold 8,000 books in June and 10,000 books in July.




-What is the degree of operating leverage for July?

• A) The same as that for June.
• B) Higher than that for June.
• C) Lower than that for June.
• D) Not determinable.

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Definitions:

Rental Income

Income earned from renting out property or equipment.

Fair Market Value

The price that property would sell for on the open market between a willing buyer and a willing seller.

Rental Payment

The amount paid periodically by a tenant to a landlord in exchange for the use of property or land.

Primarily Rental Property

Real estate that is predominantly used for rental to others, rather than as the owner's primary residence.