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Which of the following best describe the term operating leverage. Multiple Choice
The degree to which a firm or project relies on fixed costs
. Investigation of what happens to
The change in costs that occurs when there is a small change in output.
Taking into account the managerial options that are implicit in a project.
The determination of what happens to NPV estimates when we ask what-if questions.
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- What does it mean to obtain a competitive advantage? What role does the cost management system play in helping to achieve this goal?Operating leverage refers to the extent to which an organization's cost structure is made up of: differential costs. opportunity costs. fixed costs. relevant costs?What challenges might managers at SES encounter in achieving the target cost and how might they overcome these challenges?
- Give an example of how a manager can increase variable costs while decreasing fixed costs?What tool can you use to incorporate probabilities into the What-If analysis? Sensitivity analysis Decision Tables Cost-volume-profit (CVP) graph Degree of operating leverage Margin of SafetyWhy do managers consider Direct Coasts to be more accurate than Indirect Costs? How do managers decide whether a cost is a Variable or a Fixed cost? or other important and useful issues/information.
- Give an example of how a manager can decrease variable costs while increasing fixed costs?Question 2 A seminar was recently attended by the Managing Director of XYZ Manufacturing Company Limited located at Sheffield. The focus of the seminar was "optimising scarce resources utility in a manufacturing setting with particular reference to linear programming". On his return to his base, he called for a meeting with the Management to share his experience from the seminar and the impact this will have on the decision by the Board to produce two major products in the years ahead. A group of external research experts had previously been commissioned and the following represents information from the research carried out by them The expected products are "Best" and "Smart" with expected costs statistics as follows: Best £ £ Smart (3kg@£50/kg) Material costs (5kg@£50/kg) 250 150 Labour costs Machinery time 30 (4 hours @£15/Hr) 60 (4 hours @£10/hr) 40 (2hours @£15/Hr) (5hours@£10/Hr) Other Processing Time 50 The applicable pricing policy is based on total cost of production plus 20%…Why is profitability analysis necessary, with a particular emphasis on return on investment? When considering your answer, consider the ROI breakdown.
- When making decisions, managers should consider a. revenues that differ between alternatives. b. costs that do not differ between alternatives. c. only variable costs. d. sunk costs in their decisions.Give an example how a manager can increase variable cost while decreasing fixed costsDescribe the differences in behavior of fixed costs, variable costs, semi-variable costs and step costs. Then discuss how break-even analysis and contribution margin can be useful in making business decisions.