Which of the Following Factors Would Tend to Reduce a Firm's

question 54

Multiple Choice

Which of the following factors would tend to reduce a firm's business risk?

• A)The firm changes its operations to make them more cyclical.
• B)The firm increases its operating leverage.
• C)The firm increases the fixed costs that are associated with the manufacture of its products.
• D)The firm shifts its sales strategy in an effort to sell substantially more high-priced durable goods than low-priced staple goods, which reverses the sales trend that occurred during the past decade.
• E)The firm takes actions to improve the stability of its day-to-day operations.

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Definitions:

Average Price

The mean cost of a commodity or service computed by dividing the total cost of all units purchased by the number of units.

Direct Materials Variances

The variance between the real expense of direct materials in production and their expected standard cost.

Standard Direct Materials Cost

Standard direct materials cost is the estimated or pre-determined cost of raw materials used in production, based on standard pricing.

Standard Quantity Allowed

The predetermined amount of materials or inputs expected to be used in the production of goods or services under normal conditions.