A Company Is Debating Whether to Change Its Cost Structure

question 101

Multiple Choice

A company is debating whether to change its cost structure so that variable costs increase from $4 per unit to $5 per unit but fixed costs decrease from $400,000 to $300,000.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?

• 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:

Challenge Assumptions

The act of questioning and examining the validity of the underlying beliefs or premises that people take for granted.

Differing Views

Represent different perspectives or opinions on a subject.

Dominate

To have a commanding influence or control over something or someone.

Formal Governance Structures

The officially recognized systems, rules, and practices that direct and control an organization, ensuring accountability, fairness, and transparency.