Multiple Choice Questions:

1) Operating leverage predicts the effects fixed costs have on changes in operating income when:

A) Production is discontinued.

B) There are no sales returns.

C) Variable costs change.

D) Sales volume changes.

2) The degree of operating leverage can be measured by:

A) Dividing the contribution margin by operating income.

B) Dividing the fixed costs by the sales price per unit.

C) Multiplying the contribution margin to sales revenue.

D) Dividing the fixed costs by contribution margin.

3) A company's proportion of fixed costs to variable costs is called its:

A) Target profit.

B) Relevant range.

C) Mixed cost.

D) Cost structure.