The Degree of Operating Leverage for a Firm Equals the Ratio

question 3

Multiple Choice

The degree of operating leverage for a firm equals the ratio of ________ to ________.

• A) fixed costs; variable costs
• B) variable costs; fixed costs
• C) fixed costs: operating profit
• D) contribution margin; net income

---

Definitions:

Product Specifications

Detailed descriptions of the technical and physical characteristics of a product, including materials, dimensions, quality, and performance standards.

Standard Price

A predetermined cost that companies use for budgeting and assessing performance, often used in cost accounting.

Direct Materials

Raw materials that can be directly traced to the production of goods, considered a variable cost.

Production Department

A division within a company responsible for the actual production of the goods or services the company sells, involving processes like manufacturing, assembly, or processing.