What Will Be the Effect on Fixed and Variable Labor

question 33

Multiple Choice

What will be the effect on fixed and variable labor cost percentages if an operation increases its sales volume?

• A) Fixed labor cost percentage and variable labor cost percentage will decline
• B) Fixed labor cost percentage will increase and variable percentage will decline
• C) Fixed labor cost percentage will decline and variable percentage will stay the same
• D) Fixed labor cost percentage will increase and variable percentage will stay the same

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Definitions:

Idle Capacity

The unused portion of a company’s productive capacity, such as machinery or labor, that could be used for production but currently isn't.

Special Project

A temporary endeavor with a specific goal and timeline, which may require resources outside of the company's normal work scope.

Relevant Cost

Expenses that are directly tied to a specific business decision, which may affect the outcome of that decision.

Discounted Price

The reduced price of an item after applying a discount, which lowers the selling price from its original level.