The Accounting Manager of Gateway Inns Has Noted That Every

question 2

Multiple Choice

The accounting manager of Gateway Inns has noted that every time the inn's average occupancy rate increases by 2 percent,the operating cash flow increases by 5.3 percent.What is the degree of operating leverage if the contribution margin per unit is $47?

• A)0.38
• B)0.57
• C)1.75
• D)2.10
• E)2.65

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Definitions:

Administration Expenses

Expenses related to the general operation of a business that are not directly tied to the production or sale of goods or services, such as office supplies and salaries of administrative personnel.

Square Footage

A measurement of area used to determine the size of a space, often utilized in real estate to measure the size of buildings or rooms.

Setup Costs

Expenses incurred to prepare equipment or processes for manufacturing or service provision, often categorized as part of overhead.

Direct Labor Hours

The total number of hours worked by employees directly involved in the production of goods or services.