Shorter Company Had Originally Expected to Earn Operating Income of $130,000

question 124

Multiple Choice

Shorter Company had originally expected to earn operating income of $130,000 in the coming year.Shorter's degree of operating leverage is 2.4.Recently, Shorter revised its plans and now expects to increase sales by 20% next year.What is Shorter's revised expected operating income for the coming year?

• A) $192,400
• B) $156,000
• C) $312,000
• D) $130,000
• E) $62,400

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Definitions:

Price Level

A measure of the average prices of goods and services in an economy, indicating the purchasing power of money and the cost of living.

Aggregate Demand-Aggregate Supply Diagram

A graphical representation used in macroeconomics to illustrate the relationship between total demand and total supply in an economy.

Full Employment

An economic situation in which all available labor resources are being used in the most efficient way possible, essentially meaning that unemployment is at the lowest possible level without causing inflation.

Aggregate Supply Curve

A graphical representation that shows the total amount of goods and services that producers in an economy are willing and able to supply at different price levels over a period.