Which of the Following Will Typically Lead to Making the Highest

question 62

Multiple Choice

Which of the following will typically lead to making the highest profits?

• A)higher prices and higher costs
• B)lower prices and lower costs
• C)higher prices and lower costs
• D)lower prices and higher costs

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Definitions:

Fixed Costs

Expenses that do not change in total regardless of changes in the level of production or sales activities within a certain range.

Margin of Safety

The difference between actual sales and the break-even point, indicating the level of risk in not covering fixed costs.

Contribution Margin Ratio

A financial metric that measures the proportion of sales revenue that exceeds variable costs, indicating how much of the revenue is available to cover fixed costs and generate profit.

Operating Income

Earnings from a company's principal business activity, excluding expenses and revenues from non-operational sources.