Why would a company want to know their operating leverage when they can already calculate the number of units that need to be sold to reach a desired level of profit?
Q: What happens to the company’s return on investment (ROI) as sales increase? Explain.
A: Return on investment (ROI) = Net profit / Total assets
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A: Lets start with the basic understanding of break even point. Break even point is a point at which…
Q: The degree of operating leverage is equal to Group of answer choices only important…
A: Degree of operating leverage helps to identify change in operating income of a company in response…
Q: How do the DuPont technique helps the firm’s managers to further analyze its returns?
A: DuPont analysis is referred to as the framework regarding the analysis of the fundamental…
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A: Answer Option C is correct - Increase the difference between what is given up for input and what is…
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A: Sales mix represents the proportion of sales of each product in relation with the total sales of the…
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A: Return on investment means the revenues to be expected from the investment made. A company or an…
Q: How can the contribution margin be used to determine the profitability of Ford Motor Company's…
A: While determining the profitability of the organisation first to find out the total contribution…
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Q: CVP analysis
A: Option "b" is wrong because the statement is true. The purpose of CVP analysis is to study the…
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A: In the short run, fixed costs are constant. Therefore, to maximize the profit, the contribution per…
Q: The degree of operating leverage Select one: O a. can be computed by dividing total contribution…
A: Leverage is the risk that a company bears.
Q: If a company is a multiproduct firm. a. can only utilize CVP analysis if the contribution margin…
A: c) a multiproduct firm can earn a lower than expected profit though the total number of units sold…
Q: how to assess a company's success in using leverage to increase returns?
A: Leverage refers to the risk involved and the borrowed capital that is used to undertake a project…
Q: NUBD Corporation is operationally, a highly leveraged company, that is, it has high fixed costs and…
A: Higher the leverage, higher the changes in profit. As the sales increase/decrease, fixed cost…
Q: 1. The required sales in units to achive a target net income is? 2. What is the key factor in…
A: Contribution margin is the difference between sales revenue earned from a particular product and…
Q: What is the concept of operating leverage? Describe a scenario where a high degree of operating…
A: Solution- Operating leverage is the a degree to which a firm uses variable and fixed costs in…
Q: Which of the following statements about CVP analysis is false? a. Operating income calculations in…
A: The answer for the multiple choice question and relevant explanation are presented hereunder :
Q: What is meant by a product’s contribution margin ratio? How is this ratio useful in planning…
A: Contribution margin is the sales revenue of the business after deduction of variable costs from…
Q: What is return on investment, and how is it calculated?
A: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question…
Q: How do you determine the number of units that must be sold to earn this target operating profit. Is…
A: Target profit is a profit that the company wishes to obtain by changing certain variables like sales…
Q: A firm with a high degree of operating leverage: " will have a more significant shift in income as…
A: Degree of Operating Leverage is a relation of contribution margin to the net income. Contribution…
Q: Which of the following statement is CORRECT about the foundational assumption used in CVP analysis.…
A: CVP analysis means the cost-volume profit analysis. This analysis in cost management is done to have…
Q: Lowering price does not always increase revenue with increased demand. Besides reducing price, what…
A: Reducing prices will not always stimulate demand to the desired extent especially in case of…
Q: Why would a firm want to measure profits by segment and how would common costs be allocated to each…
A: Introduction: Common costs are company expenses that are shared by numerous departments. Common…
Q: Is there a point in a cost-volume-profit analysis when the company is expected to profit?
A: Is there a point in a cost-volume-profit analysis when the company is expected to profit? Answer:…
Q: On a CVP graph for a profitable company, the total revenue (sales) line will be steeper than the…
A: The graphical representation of the cost-volume benefit analysis is a cost volume profit graph, also…
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A: Understanding cost behaviour entails comprehending how an entity's costs and expenditures affect its…
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A: DuPont ROE According to DuPont analysis, ROE is calculated as shown below. ROE=Profit margin×Asset…
Q: How will relating product contribution margins to the amount of the constrained resource theyconsume…
A: Definition: Contribution Margin: The process or theory which is used to judge the benefit given by…
Q: The extent, or relative size of fixed costs in a company;s total cost structure is known as…
A: Financial leverage is the application of funds with a fixed cost to increase earnings per share.
Q: A company can use cost-volume-profit analysis to determine the level of sales required to earn a…
A: CVP Analysis Equation Profit = Revenue – Fixed Costs – Variable Costs
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A: The output levels achieve highest efficiency and peak profits when marginal revenue is on par or…
Q: If total costs remain the same, the smaller the proportion of fixed costs in a firm's cost structure…
A: Under Marginal costing (variable costing) contribution percentage or contribution per unit of…
Q: What factors affecting ROI does the DuPont method of profitability analysis highlight?
A: DuPont method of Profitability Analysis: According to DuPont method of Profitability Analysis,…
Q: How can the expected sales for a product group be converted into ex
A: A product group is a collection of various products, classes of products, segments, etc which are…
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Q: The component that analyzes profitability is • , and its value is The component that analyses…
A: DuPont Analysis has been developed by the DuPont Corporation for decomposing different aspects of…
Q: Which of the following equations can be used to compute a firm’s magnitude of operating leverage?…
A: In terms of accountancy, degree (magnitude) of operating leverage (DOL) can be defined as the ratio…
Why would a company want to know their operating leverage when they can already calculate the number of units that need to be sold to reach a desired level of profit?
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- What analysis ensures that the income for the firm will cover its variable costs? a. ratio analysis b. financial analysis c. cost volume profit analysis d. sales analysisThe difference between the average customer’s willingness to pay and the total costs of a product is known as ______. When a company makes a profit, the difference between the price of the product and the cost of production is known as what? Value creation and value capture are key concepts for which parts of business? If a company innovates in a way that reduces its production costs without affecting any features of the product, would that create value? Suppose a price war was to erupt in the airline market, which causes prices for flights to decline, but affected nothing else about the industry. Would this change the value created by airlines? Suppose a price war was to erupt in the airline market, which causes prices for flights to decline, but affected nothing else about the industry. Would this change the value captured by airlines? Please solve all part and do not give solution in image format thankuIf a firm's marginal revenue is smaller than its marginal cost, then the firm should collect additional information before taking any action. increase output to increase profit. keep output the same decrease output to increase profit.
- Changes in sales cause changes in profits. Would the profit change associated with sales changes be larger or smaller if a firm increased its operating leverage? Explain your answer.What factors affecting ROI does the DuPont method of profitability analysis highlight?1) Which of the following statements describes the force that drives the distribution of resources (goods and services, labor, and money) in a free-enterprise economy? A) Businesses are willing to supply more of a good or service at higher prices because the potential for profits is higher. B) Supply and demand curves intersect at the point where supply and demand are not equal. C) Changing the price of a product does not alter the supply curve. D) The price at which the number of products that businesses are willing to supply is inversely proportional to the amount of products that consumers are willing to buy at a specific point in time. E) Prices for goods and services vary according to the changes in supply and demand. 1)
- What is meant by a product’s contribution margin ratio? How is this ratio useful in planning business operations? Often the most direct route to a business decision is an incremental analysis. What is meant by an incremental analysis?Is there a point in a cost-volume-profit analysis when the company is expected to profit?Cost-volume-profit analysis is used to make many decisions, including product pricing and controlling costs. How does good operating leverage magnify earnings results with modest revenue increase?
- . A company can use cost-volume-profit analysis to determine the level of sales required to earn a target profit. TRUE OR FALSEHow can the contribution margin be used to determine the profitability of Ford Motor Company's products and how could it be used to make the operations more profitable?Lowering price does not always increase revenue with increased demand. Besides reducing price, what else can a firm do to stimulate demand for its product?