When Forecasting Income Statements, Which of the Following Is Generally

question 15

Multiple Choice

When forecasting income statements, which of the following is generally a key assumption firms make about their variable operating costs?

• A)Variable operating costs remain the same each year.
• B)Variable operating costs increase at the same rate as sales.
• C)Variable operating costs are forecast to be the average of the operating costs during the previous three years.
• D)Variable operating costs decrease when sales increase.
• E)Variable operating costs are set at industry averages.

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Definitions:

Capital Investment

Funds invested in a business with the intent to further its objectives, such as acquiring new assets or launching new ventures.

Investment Funds

Pooled funds from multiple investors used to collectively invest in securities such as stocks, bonds, or other assets, managed by professionals.

Manufacturing Flexibility

The ability of a manufacturing process to adapt to changes in products or production volumes with minimal delay and cost.

Capital Investment

Funds invested in a business with the expectation of future benefits, such as the purchase of equipment or property.