Calculating Operating Leverage

question 9

Multiple Choice

Calculating operating leverage. TurkeyJerkey Dried Meats Ltd had a degree of accounting operating leverage equal to 1.714 during the most recent period. If the company's EBITDA was $4,000 and depreciation and amortisation was equal to $500, then what were TurkeyJerkey's fixed cash expenses during the same period?

• A) $1,499
• B) $1,999
• C) $5,499
• D) $5,999

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Definitions:

Annual Carrying Costs

The total expenses associated with holding or storing inventory over a year, including costs related to storage, insurance, and obsolescence.

Ordering Costs

Expenses associated with making an order for goods or services, including administrative costs, shipping charges, and time spent on ordering processes.

Carrying Costs

Expenses associated with holding inventory, including storage, insurance, and obsolescence.

Gadgets

Small electronic or mechanical devices or tools that are innovative and designed for a particular purpose.