If a Firm's Degree of Accounting Operating Leverage Is 1

question 19

True/False

If a firm's degree of accounting operating leverage is 1.12, a 10 percent increase in revenue should result in a 12.0 percent increase in EBIT.

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Definitions:

Underapplied Overhead

A condition where the actual overhead costs incurred exceed the allocated expenses in the manufacturing process.

Factory Overhead Account

An accounting category that accumulates all manufacturing costs that are not directly tied to a specific product or production job.

Cost Accounting Systems

Systems used by businesses to track, record, and analyze costs associated with their operations to aid in budgeting, cost control, and profitability analysis.

Job Order Costing

An accounting method used to track the costs associated with producing a specific item or completing a specific job.