What Measures the Percentage Change in Profits Resulting from a Percentage

question 8

Multiple Choice

What measures the percentage change in profits resulting from a percentage change in sales?

• A) degree of operating leverage
• B) degree of sales margin leverage
• C) degree of variable cost leverage
• D) degree of contribution margin ratio

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Definitions:

Labor Efficiency Variance

The difference between the actual hours worked and the standard hours allowed for the work done, multiplied by the standard labor rate, indicating the efficiency of labor used in production.

Work in Process Inventory

The cost of unfinished goods in production, including labor, raw materials, and overhead.

PP&E (Net) Account

Property, Plant, and Equipment (Net) account shows the net book value of a company's fixed assets less accumulated depreciation.

Direct Labor Costs

Expenses associated with employees who are directly involved in the production process, including wages and benefits, forming a major component of product costs.