Exam 2: Cost Behavior, Operating Leverage, and Profitability Analysis

Mug Shots operates a chain of coffee shops. The company pays rent of $15,000 per year for each shop. Supplies (napkins, bags and condiments) are purchased as needed. The managers of each shop are paid a salary of $2,500 per month and all other employees are paid on an hourly basis. The cost of rent relative to the number of customers in a particular shop and relative to the number of customers in the entire chain of shops is which kind of cost, respectively?

The magnitude of operating leverage for Forbes Corporation is 1.8 when sales are $200,000 and net income is $24,000. If sales increase by 5%, what is net income expected to be?

The following income statement is provided for Grant, Inc. Sales revenue (1,500@\ 30 per unit ) \ 45,000 Variable costs (1,500@\ 14 per unit ) 21,000 Fixed costs Net income \8 ,000 What is this company's magnitude of operating leverage?

The activity director for City Recreation is planning an activity. She is considering alternative ways to set up the activity's cost structure. Select the incorrect statement from the following.

Taste of the Town, Inc. operates a gourmet sandwich shop. The company orders bread, cold cuts, and produce several times a week. If the cost of these items remains constant per customer served, the cost is said to be: