The Following Is Addison Corporation's Contribution Format Income Statement for Last

question 63

Multiple Choice

The following is Addison Corporation's contribution format income statement for last month: The company has no beginning or ending inventories. A total of 20,000 units were produced and sold last month.
-What is the company's degree of operating leverage?

• A) 0.12
• B) 2.5
• C) 0.4
• D) 3.3

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Definitions:

Agency Costs

The costs associated with resolving conflicts of interest between principals and agents, including monitoring and incentive expenses.

Principals

Individuals or entities that authorize agents to act on their behalf in business transactions.

Incentivizing Agents

Strategies to motivate individuals or entities acting on behalf of others or organizations towards desired behaviors or goals, often through rewards or benefits.

Agency Costs

Expenses and losses in value occurring when there is a conflict of interest between the principals (owners) and the agents (managers) of a company.