When a Fixed Cost Is Replaced with a Variable Cost

question 198

Multiple Choice

When a fixed cost is replaced with a variable cost, the firm's ____________ effectively decreases.

• A) Operating leverage.
• B) Forecasting risk.
• C) Projected cash flow.
• D) Sensitivity contribution.
• E) Total variable cost.

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Definitions:

Standard Error

The standard deviation of the sampling distribution of a statistic, often used to estimate the accuracy of sample mean as an approximation of the population mean.

Means

The arithmetic averages of a set of numbers or data points.

N = 11

A statement indicating a sample size, or total number of observations, equals to eleven.

Critical Value

A threshold in statistics above or below which a statistical result is considered significant.