If Sales Are $500,000, Variable Costs Are 75% of Sales

question 197

Multiple Choice

If sales are $500,000, variable costs are 75% of sales, and operating income is $40,000, what is the operating leverage?

• A) 0
• B) 1.25
• C) 1.3
• D) 3.1

Analyze the tax effects of depreciation and investment allowances on investment decisions.

Understand the implications of a proposal's profitability index being greater than one.

Calculate the after-tax cash flows and net present value of replacement investments.

Identify the advantages and limitations of using net present value (NPV) for investment appraisal.

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Definitions:

Distortions

The act of twisting or altering something out of its true, natural, or original state, often leading to misconceptions or inaccuracies.

Stage Model

A conceptual framework outlining a sequence of phases or steps typically followed in a process or development, such as in negotiations.

Dialogue

A conversation or exchange of ideas aimed at reaching understanding, resolving differences, or exploring possibilities.

Competitive Strategy

A method or plan chosen to bring about a desired future, such as achieving a competitive advantage in the market or industry.