Match each item with the correct statement below.
-Fixed expenses that cannot be directly traced to individual segments and that are unaffected by the elimination of any one segment.
A)break-even point
B)Common fixed expenses
C)Contribution margin
D)Direct fixed expenses
E)Margin of safety
F)Operating leverage
G)Degree of operating leverage
H)Sales mix

Question

Quizplus · Accepted Answer

Common fixed expenses are not allocated to individual segments and remain unchanged even after the elimination of any one segment.

Answer: D 
 Direct fixed expenses are fixed expenses that can be traced directly to a specific segment and would be eliminated if that segment were eliminated.

Answer: C 
 Contribution margin is the amount leftover from sales revenue after variable expenses have been deducted and is used to cover fixed expenses and generate profits.

Answer: E 
 Margin of safety is the excess of actual or projected sales over the break-even sales and indicates the cushion or safety net a company has before it starts incurring losses.

Answer: F 
 Operating leverage is the degree to which a company relies on fixed costs rather than variable costs to generate profits and is calculated as contribution margin divided by net income.

Answer: G 
 Degree of operating leverage is the percentage change in net income that results from a percentage change in sales and is used to measure a company's sensitivity to changes in sales.

Answer: H 
 Sales mix is the proportion of each product sold in a company's product line and affects the contribution margin and break-even point of the company.

Match Each Item with the Correct Statement Below