Because Fixed Costs Generally Do Not Change in the Short

question 4

Multiple Choice

Because fixed costs generally do not change in the short term:

• A)CVP is not appropriate if fixed costs are low.
• B)They are generally not included as a component in CVP analysis.
• C)Decreasing contribution margin increases profit by an identical amount.
• D)Increasing contribution margin increases profit by an identical amount.
• E)None of the above.

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Definitions:

Barriers

Obstacles that prevent or hinder entry into a market or the pursuit of certain activities, which can be economic, legal, technical, or natural in nature.

Allocative Efficiency

A state of the economy in which production represents consumer preferences; every good or service is produced up to the point where the last unit provides a benefit to consumers equal to the cost of producing it.

Productive Efficiency

A state where goods and services are produced at the lowest possible cost and resources are utilized in the most efficient way.

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output decreasing with increasing scale.