BUS225 ABA Individual Project - Operating and
Financial Leverage Study Guide questions and
answers 2024\2025 A+ Grade
Which financial tool causes higher favorable results when the company is doing well, and the opposite
under negative conditions?
Leverage
Break-even point
Degree of debt
Degree of capital
- correct answer Leverage
What does leverage represent?
1. The use of fixed cost items to magnify the firm's results
2. The use of business cost items to magnify the firm's results
3. The use of variable costs to magnify the firm's results.
- correct answer The use of fixed cost items to magnify the firm's results
What are some uses for break-even analysis? (Select Multiple)
1. To see how much the changes in cost affect variable costs.
2. To determine the magnitude of operations necessary to avoid loss.
3. To see how much the changes in volume affect cost and profit.
4. To figure out the operating leverage.
5. To figure out the most inefficient way to make profit.
, 6. To figure out the most efficient level of fixed costs for the firm.
- correct answer 2. To determine the magnitude of operations necessary to avoid loss
3. To see how much the changes in volume affect cost and profit
6. To figure out the most efficient level of fixed costs for the firm
Calculate the contribution margin.
Fixed Costs: $1,575,000,000
Price per unit: $645
Variable Cost per unit: $223
$426
$422
$416
- correct answer $422 (CM = Price per unit - VC per unit)
Calculate the break-even point in units.
Fixed Costs: $1,575,000,000
Price per unit: $645
Variable Cost per unit: $223
Contribution margin: $422
3,918,838
3,508,293
3,732,227
- correct answer 3,732,227 (BE in units = Fixed Costs/CM)
What is the company's revenue at the break-even point?
Financial Leverage Study Guide questions and
answers 2024\2025 A+ Grade
Which financial tool causes higher favorable results when the company is doing well, and the opposite
under negative conditions?
Leverage
Break-even point
Degree of debt
Degree of capital
- correct answer Leverage
What does leverage represent?
1. The use of fixed cost items to magnify the firm's results
2. The use of business cost items to magnify the firm's results
3. The use of variable costs to magnify the firm's results.
- correct answer The use of fixed cost items to magnify the firm's results
What are some uses for break-even analysis? (Select Multiple)
1. To see how much the changes in cost affect variable costs.
2. To determine the magnitude of operations necessary to avoid loss.
3. To see how much the changes in volume affect cost and profit.
4. To figure out the operating leverage.
5. To figure out the most inefficient way to make profit.
, 6. To figure out the most efficient level of fixed costs for the firm.
- correct answer 2. To determine the magnitude of operations necessary to avoid loss
3. To see how much the changes in volume affect cost and profit
6. To figure out the most efficient level of fixed costs for the firm
Calculate the contribution margin.
Fixed Costs: $1,575,000,000
Price per unit: $645
Variable Cost per unit: $223
$426
$422
$416
- correct answer $422 (CM = Price per unit - VC per unit)
Calculate the break-even point in units.
Fixed Costs: $1,575,000,000
Price per unit: $645
Variable Cost per unit: $223
Contribution margin: $422
3,918,838
3,508,293
3,732,227
- correct answer 3,732,227 (BE in units = Fixed Costs/CM)
What is the company's revenue at the break-even point?
