THE FOLLOWING DATA APPLY TO TWO COMPANIES PRODUCING SIMILAR PRODUC...

27. - MOCK AND SAMPLE EXAMS CFA LEVEL I MOCK EXAM MORNING VERSIONB QUESTIONS 2014 27. - MOCK AND SAMPLE EXAMS CFA LEVEL I MOCK EXAM MORNING VERSIONB QUESTIONS 2014
MOCK AND SAMPLE EXAMS CFA LEVEL I MOCK EXAM MORNING VERSIONB QUESTIONS 2014

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The following data apply to two companies producing similar products. Company A Company BNumber of units produced and sold 1 million 1 millionSale price per unit $100 $100Variable cost per unit $60 $50Fixed operating costs $20 million $40 millionFixed financing expenses $10 million $5 millionDegree of operating leverage (DOL) ? 5.0Degree of financial leverage (DFL) 2.0 2.0Compared with Company B, Company A has: A. a higher degree of total leverage. B. a lower sensitivity of operating income to changes in units sold. C. the same sensitivity of operating income to changes in net income. 399388