If the Consumption Function Is Given by C = 150

question 155

Multiple Choice

If the consumption function is given by C = 150 + 0.85Y and Y increases by 1 unit, then savings:

• A)decreases by 0.85 unit
• B)decreases by 0.15 unit.
• C)increases by 0.15 unit.
• D)increases by 0.85 unit.

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Definitions:

Break-even Point

The point at which total costs and total revenues are equal, meaning there is no profit or loss.

Variable Expenses

Costs that vary directly with levels of production or sales volume, such as materials and labor.

Fixed Expenses

Recurring costs that do not vary with the volume of production or sales, similar to fixed costs.

Variable Costing

An accounting method that includes only variable production costs—direct materials, direct labor, and variable manufacturing overhead—in unit product costs.