A Company Is Debating Whether to Change Its Cost Structure

question 91

Multiple Choice

A company is debating whether to change its cost structure so that fixed costs increase from $300,000 to $400,000,but variable costs decrease from $5 per unit to $4 per unit.If it were to implement the change at its current production level of 100,000,profit would not change.What would happen to the company's profit if the change were implemented and production increased to 125,000?

• A)It will stay the same.
• B)It will increase.
• C)It will decrease.
• D)It could increase or decrease.

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Definitions:

Premises

Statements or propositions that are presented as the basis for a conclusion, forming the groundwork of an argument or logical reasoning.

Independent

Not influenced by or dependent on something else; having the freedom to act, operate, or decide without being controlled by others.

Dependent

In statistical terms, a variable whose value is influenced or determined by another variable; in general, relying on someone or something else for support or existence.

Deductive Step

A logical step in which a conclusion follows necessarily from the given premises, ensuring that if the premises are true, the conclusion must also be true.