Combined Leverage Is Concerned with the Relationship Between

question 101

Multiple Choice

Combined leverage is concerned with the relationship between

• A) changes in EBIT and changes in EPS.
• B) changes in volume and changes in EPS.
• C) changes in volume and changes in EBIT.
• D) changes in EBIT and changes in net income.

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Definitions:

Contribution Margin

The difference between the sales revenue of a company and its variable costs, indicating how much contributes to covering its fixed costs and generating profit.

Sales Volume

The total quantity of sales or units sold within a particular time frame.

Break-Even Point

The point at which total costs equal total revenues, meaning the business is not making a profit or a loss.

Direct Material

Raw materials that can be physically and directly associated with the finished product during the manufacturing process.