At an Output Level of 50,000 Units,you Calculate That the Degree

question 25

Multiple Choice

At an output level of 50,000 units,you calculate that the degree of operating leverage is 1.8.What will be the percentage change in operating cash flow if the new output level is 54,500 units?

• A)5.00 percent
• B)6.17 percent
• C)16.20 percent
• D)17.43 percent
• E)20.00 percent

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Definitions:

Capital Goods

Long-lasting goods acquired and used by businesses to produce other goods and services, contributing to their operational capabilities.

Gross Investment

The total amount spent on purchasing or constructing new capital assets before accounting for depreciation.

Net Investment

The portion of total investments in physical assets (like buildings, machinery, and inventory) that remain after accounting for depreciation.

Depreciation

The process of allocating the cost of a tangible or intangible asset over its useful life, reflecting the decrease in value of the asset over time due to use, wear and tear, or obsolescence.