For Most Firms in the Economy, the Largest Part of Factor

question 87

Multiple Choice

For most firms in the economy, the largest part of factor costs is the cost of

• A)labor.
• B)capital.
• C)property and machinery.
• D)land and natural resources.

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Definitions:

High-Low Method

A method employed in cost accounting that calculates estimated variable and fixed costs using the highest and lowest activity levels.

Fixed Cost

A cost that does not change with an increase or decrease in the amount of goods or services produced or sold by a business.

Degree of Operating Leverage

A measure that quantifies how much sales revenue can affect operating income due to the presence of fixed costs in a company's cost structure.

Pretax Profit

The profit earned by a company before any tax is deducted, showing the company's earnings directly from its operations.