An Operation Has an Expense That Is 100% Variable

question 10

Multiple Choice

An operation has an expense that is 100% variable. If that operation's sales volume decreases, the amount spent on this variable expense will

• A) increase and the variable expense percentage will increase.
• B) decrease and the variable expense percentage will decrease.
• C) increase and the variable expense percentage will be unchanged.
• D) decrease and the variable expense percentage will be unchanged.

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Definitions:

Costing Approach

A method or system used to calculate the cost of a product, project, or service for accounting, financial, and strategic planning.

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenue.

Fixed Costs

Expenses that do not change in proportion to the activity of a business, such as rent, salaries, and insurance.

Variable Costs

Financial outlays that directly correspond to the volume of production or sales, encompassing costs for raw materials and direct labor.