Outside the Relevant Range, Variable Costs, Such as Direct Material

question 154

Multiple Choice

Outside the relevant range, variable costs, such as direct material costs ________.

• A) will decrease proportionately with changes in sales volumes
• B) will remain the same with changes in production volumes
• C) will not change proportionately with changes in production volumes
• D) will increase proportionately with changes in sales volumes

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Definitions:

Anticipated Rate of Growth

The expected annual increase in a company's revenue or profit, often expressed as a percentage.

Financial Leverage

The use of borrowed funds with a fixed cost to finance the assets of the business to increase the potential return to shareholders.

Planned Activities

Scheduled actions or tasks outlined by an organization or individual aimed at achieving specific goals.

Retention Ratio

The proportion of net income that is retained by a company rather than distributed to its shareholders as dividends.