1. Which of the following statements is true? a. The higher the firm's leverage, the higher...

1. Which of the following statements is true?

a.	The higher the firm's leverage, the higher the degree of sensitivity of profits to cost changes.
b.	The higher the firm's leverage, the lower the degree of sensitivity of profits to cost changes.
c.	The higher the firm's leverage, the higher the degree of sensitivity of profits to volume changes.
d.	The higher the firm's leverage, the lower the degree of sensitivity of profits to volume changes.

2. A cost that changes as a result of changing activities or levels of activities is called which of the following?

a.	product cost.
b.	department cost.
c.	batch cost.
d.	differential cost.

3. Which of the following terms describes the optimal number of units to order or produce?

a.	economic order quantity.
b.	effective order quantity.
c.	efficient order quantity.
d.	elastic order quantity.

Expert Solution

1. Which of the following statements is true?

Ans) Option (B) is true. The higher the firm's leverage, the lower the degree of sensitivity of profits to cost changes.

2. A differential cost is a cost that changes (differs) as a result of changing activities or levels of Activities

Ans) Option (D) Differential costig

3. Economic order quantity is a quantity where ordering or production costs are minimal

Ans) Option (A) Economic order quantity is correct

ekkarill92 answered 2 years ago

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