If a Company Has Fixed Costs and Is Operating at a Level

question 142

Multiple Choice

If a company has fixed costs and is operating at a level above the break-even point, what happens to profits when sales increase by 20%?

• A)Profits will increase by less than 20%.
• B)Profits will increase by 20%.
• C)Profits will increase by more than 20%.
• D)Profits will decrease by less than 20%.

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Definitions:

Outstanding Checks

Checks that have been written and recorded in a company's financial statements but have not yet been cashed or cleared by the bank.

Buyer

An individual or entity that purchases goods or services from another party, exchanging money for the ownership or use of the product or service.

Party to a Check

Individuals or entities involved in the transaction of a check, including the drawer, payee, and sometimes an endorser.

Maker

In financial terms, the party that creates or issues a promissory note or draft, committing to pay the specified amount.