Break-Even Point and Operating Leverage: Understanding Firm's Cost Structures, Quizzes of Finance

Download Break-Even Point and Operating Leverage: Understanding Firm's Cost Structures and more Quizzes Finance in PDF only on Docsity! TERM 1 The sales break-even point is defined as: DEFINITION 1 the level of sales that a firm must reach to cover total operating costs TERM 2 Firms with high fixed operating costs: DEFINITION 2 tend to have low variable costs TERM 3 Given fixed costs of $100,000, variable costs of $7.00 per unit, and a sales price per unit of $10.00, calculate the break-even point in units. DEFINITION 3 33,333 TERM 4 Given fixed costs of $200,000, variable costs of $6.00 per unit, and a sales price per unit of $7.00, calculate the break-even point in units. DEFINITION 4 200,000 TERM 5 Firms with relatively low fixed operating costs and high variable operating costs can best be described as: DEFINITION 5 having a low degree of operating leverage TERM 6 If variable costs = $10.00 per unit; and the selling price = $13.00 per unit, and the break- even point in units = 100,000, calculate the fixed costs. DEFINITION 6 $300,000 TERM 7 Degree of operating leverage can best be defined as: DEFINITION 7 DOL = % change EBIT% change in Sales TERM 8 Total variable costs are $15,000, sales $50,000, and fixed costs $15,000; calculate DOL. DEFINITION 8 1.75 TERM 9 Whenever fixed costs are greater than zero, DOL is: DEFINITION 9 greater than 1 TERM 10 Working capital includes all but which of the following: DEFINITION 10 prepaid expenses TERM 21 All else constant, which of the following would decrease net working capit DEFINITION 21 A$450,000increasein accounts payable TERM 22 Operating leverage has the effect of triggering DEFINITION 22 alarger percentage changein EBIT when agivenpercentage changein salesoccurs TERM 23 Accounts receivable and inventory: DEFINITION 23 tie up funds, have opportunitycosts, and may add to the firm's long-term value TERM 24 If a firm's level of accounts receivable increases, bad debt expense will tend to: DEFINITION 24 increase TERM 25 The Five C's of Credit includes capacity which means: DEFINITION 25 an ability to pay TERM 26 Firms with high fixed operating costs: DEFINITION 26 tend tohavelow variablecost