With the Existence of Fixed Operating Costs, a Decrease in Sales

question 62

Multiple Choice

With the existence of fixed operating costs, a decrease in sales will result in_________in EBIT.

• A) a less than proportional decrease
• B) an equal increase
• C) a more than proportional decrease
• D) a proportional increase

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Definitions:

Dumping

The practice of selling a product in a foreign market at a price below its domestic market price or below the cost of production.

Tariffs

Taxes imposed on imported goods and services, aimed at making them more expensive to protect local industries from foreign competition.

Revenue

The total income generated by a company from its business activities, typically from the sales of goods or services before any expenses are deducted.

Break-even

The point at which total costs and total revenue are equal, meaning that a business neither makes a profit nor suffers a loss.