Which of the Following Statements Is True of Operating Leverage

question 117

Multiple Choice

Which of the following statements is true of operating leverage?

• A) It is the difference between price and unit variable cost.
• B) It is the use of fixed costs to increase the percentage changes in profits as sales activity changes.
• C) It shows how far a company's actual sales and/or units are above or below the break-even point.
• D) It is the ratio of total contribution margin to sales or of unit contribution to price.
• E) None of these

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Definitions:

Dependent Variable

In an experiment or statistical model, the variable that is being tested and measured, often influenced by the independent variable(s).

Independent Variable

In an experiment, the variable that is intentionally changed to observe its effect on the dependent variable.

Least Squares Estimate

A statistical method used to determine the line of best fit by minimizing the sum of squares of the differences between observed and predicted values.

Intercept

The point at which a line crosses the axis in a graph, often associated with the starting value of a function when all independent variables equal zero.