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Question 1 of 20
The concept of operating leverage involves the use of __________ to magnify returns at
high levels of operation.
A. fixed costs
B. variable costs
C. marginal costs
D. semi-variable costs
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A. an operating loss.
B. an operating profit.
A. $5.
B. $2.
C. 50 cents.
D. $4.
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Answer: B. $2
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Question 7 of 20
If a firm has fixed costs of $20,000, variable cost per unit of 50 cents, and a breakeven
point of 5,000 units, the price is:
A. $2.50.
B. $5.
C. $4.
D. $4.50.
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Answer: D. $4.50
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Question 8 of 20
If a firm has a price of $4, variable cost per unit of $2.50, and a breakeven point of
20,000 units, fixed costs are equal to:
A. $13,333.
B. $10,000.
C. $30,000.
D. $50,000.
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Answer: C. $30,000
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Question 9 of 20
A firm’s break-even point will rise if:
A. fixed costs decrease.
A. Financial leverage
B. Break-even point
C. Operating leverage
D. Combined leverage
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A. 5.33x
B. 1.23x
C. 0.8125x
D. 4.33x
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Answer: B. 1.23x
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Question 17 of 20
The degree of financial leverage is concerned with the relation between:
B. Firm B
Answer: A. Firm A