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NEW QUESTION: 1
The management of Strings & All, Inc., a small, highly leveraged, electric guitar manufacturer, wants to reduce the company's degree of total leverage (DTL) to 2.0. Currently, the company's expected operating performance is as follows:
To obtain a DTL of 2.0, management must (all else constant):
A. increase variable expenses by 30%.
B. reduce variable expenses by 30%.
C. reduce variable expenses by 38.5%.
D. increase variable expenses by 38.5%.
Answer: B
Explanation:
Explanation/Reference:
Explanation:
To obtain this result, we need to calculate the current variable costs, determine the variable costs that will result in a DTL ratio of 2.00, and calculate the percentage change.
Step 1: Calculate current variable costs (VC): VC = 0.6 * 500,000 = 300,000 Step 2: Calculate Variable costs needed to decrease the DTL to 2.0:
Rearranging the formula for DTL:
= (Sales - Variable Costs) / (Sales - Variable Costs - Fixed Costs - Interest Expense) results in: Variable Costs (VC) = Sales - (2 * Fixed Costs) - (2 * Interest Expense)
= 500,000 - (2*120,000) - (2*25,000) = 210,000
Step 3: Calculate percentage change:
VC = (300,000 - 210,000) / 300,000 = 0.30, or 30%.
ꢀ
NEW QUESTION: 2
Which is a reason for conducting a health check?
A. Select value-improving proposals for implementation
B. Review the status of MoV in an organization where MoV activities could be improved
C. Identify MoV study leaders
D. Develop an Option Evaluation Matrix
Answer: B
NEW QUESTION: 3
A. Option D
B. Option E
C. Option B
D. Option C
E. Option A
F. Option F
Answer: D
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