If Company a Is Heavily Labor-Intensive and Company B Is

question 74

Multiple Choice

If Company A is heavily labor-intensive and Company B is heavily capital-intensive which of the following is most likely to be true relative to the other company?

• A)Company A's contribution margin per unit will be higher
• B)Company B's contribution margin per unit will be higher
• C)Company A's break-even point will be higher
• D)Company B's contribution margin ratio will be lower

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Definitions:

Accounts Receivable

The amount of money owed to a company by its customers for goods or services that have been delivered or used but not yet paid for.

Cash Sales

Transactions where payment is made in cash at the time of the sale, without any credit extended.

Credit Sales

Sales transactions where the buyer is allowed to pay the seller at a later date, typically extending credit to the customer.

Direct Method

A way to present the cash flow statement where actual cash flows from operating activities are disclosed, contrasting with the indirect method.