The Greater the Ratio of Variable Costs to Sales, The

question 105

Multiple Choice

The greater the ratio of variable costs to sales, the:

• A)more each additional sale contributes to coverage of fixed costs.
• B)lower the level of profitability.
• C)more units must be sold to cover fixed costs.
• D)lower the benefit of conducting a sensitivity analysis.

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Definitions:

Withdraws

Funds taken out from a business by the owner(s) for personal use, also known as drawings.

Partnership Dissolves

The process of ending a partnership agreement, which involves the redistribution or liquidation of assets among the partners and settling the partnership's obligations.

Old Partners' Capital Accounts

Accounts used to record the amount of equity owned by each partner in a partnership, prior to any changes or reallocation of partnership interests.

Credited

A term reflecting an entry on the right side of a double-entry bookkeeping system that increases liabilities, revenue, or equity accounts, or decreases an asset or expense account.