If the Fixed Costs for a Product Increase and the Variable

question 15

Multiple Choice

If the fixed costs for a product increase and the variable costs (as a percentage of sales dollars) increase,what will be the effect on the contribution margin ratio and the break-even point respectively?

• A)a
• B)b
• C)c
• D)d

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Definitions:

Short Run

A period in economics where the output is influenced by the level of production capacity, and certain economic conditions or costs cannot change.

Long Run

In economics, a period in which all inputs can be adjusted by firms, and there are no fixed costs, allowing for full industry adjustment.

Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, begins to decrease.

Marginal Cost

The change in total production cost that arises when the quantity produced is incremented by one unit.