Match each item with the correct statement below.
-Fixed costs that are directly traceable to a given segment and, consequently, disappear if the segment is eliminated.
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

Direct fixed expenses are fixed costs directly associated with a segment and disappear if the segment is eliminated.

Answer: B
 Common fixed expenses are fixed costs that cannot be directly traced to a given segment and would not disappear if the segment is eliminated.

Answer: C
 Contribution margin is the amount of sales revenue that remains after deducting variable costs and is used to cover fixed costs and provide profit.

Answer: E
 Margin of safety is the difference between actual or projected sales and the break-even point, indicating how much sales can decline before incurring a loss.

Answer: F
 Operating leverage measures the relative amount of fixed and variable costs that make up a company's cost structure, affecting the level of risk and reward associated with changes in sales volume.

Answer: G
 Degree of operating leverage quantifies the sensitivity of net operating income to changes in sales volume, based on the ratio of fixed costs to total costs.

Answer: H
 Sales mix refers to the proportion of each product or service sold relative to total sales, affecting the overall contribution margin and break-even point.

Match Each Item with the Correct Statement Below