Question : 11) Which of the following statements true concerning operating leverage? A) : 1186246

 

11) Which of the following statements is true concerning operating leverage?

A) It summarizes the risk-return tradeoff across alternate revenue possibilities.

B) It measures the change in operating income when costs change proportionately with the change in the number of units sold.

C) The degree of operating leverage increases inversely to the number of units sold.

D) The degree of operating leverage remains constant (in the relevant range) when there is a change in the number of units sold.

E) The degree of operating leverage equals contribution margin divided by operating income, at any specific sales level.

 

12) Which of the following factors would be relevant in classifying costs as fixed or variable in a specific decision situation?

A) if the time horizon is short or long

B) the relevant range of the next best alternative situation

C) the mix of revenues

D) the sales mix

E) if the time horizon is shorter in another alternative

 

Use the information below to answer the following question(s).

 

Big Sports University is planning to hold a fund raising banquet at one of the local country clubs. It has two options for the banquet:

 

1.Foothills Country Club

a.Fixed rental cost of $600

b.plus $15.00 per person for food.

2.Downhill Country Club

a.Fixed rental cost of $1,080

b.It will have to hire a caterer who charges $12.00 per person for food.

 

Big Sports has budgeted $900 for administrative and marketing expenses. It plans to hire a band, which will cost another $400. Tickets are expected to be $40 per person. Any other items required for the event will be donated by its local business supporters.

 

13) What is the break-even point in tickets sold of option one?

A) 85 tickets

B) 80 tickets

C) 76 tickets

D) 60 tickets

E) 24 tickets

14) The break-even point in tickets sold of option two?

A) 85 tickets

B) 80 tickets

C) 76 tickets

D) 39 tickets

E) 71 tickets

 

15) What is the “operating income” assuming 250 people attend and option one is chosen?

A) $4,400

B) $4,350

C) $4,000

D) $6,250

E) $4,750

16) What is the “operating income” assuming 250 people attend and option two is chosen?

A) $7,000

B) $2,900

C) $2,750

D) $4,620

E) $5,080

 

17) How many people must purchase tickets assuming option two is chosen, and Big Sports expects to raise $4,820 for the athletic fund? Assume no one pays more than the cost of his/her ticket.

A) 258 people

B) 173 people

C) 243 people

D) 276 people

E) 310 people

 

18) An expected value decision model is used for

A) determining if a budgeted amount will deviate from an actual amount.

B) determining if a budgeted amount will be the same as an actual amount.

C) enabling managers to deal with events using a qualitative analysis method.

D) enabling managers to deal with uncertainty using quantitative analyses.

E) identifying factors that distinguish an action from an event.

 

19) Events, as distinguished from actions, would include

A) personnel policy options.

B) decisions on time schedules.

C) decisions on direct material vendors.

D) a financial recession.

E) price changes of the company’s products.

20) Expected monetary value may be defined as

A) the weighted average of all possible outcomes.

B) the probability that each outcome will not occur.

C) the weighted average of the financial outcomes with the probability of each outcome serving as the weight.

D) the average of all possible outcomes.

E) the weighted average of all mutually exclusive outcomes.

 

 

 

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