The Greater the Ratio of Variable Costs to Sales, The

question 105

Multiple Choice

The greater the ratio of variable costs to sales, the:

• A)more each additional sale contributes to coverage of fixed costs.
• B)lower the level of profitability.
• C)more units must be sold to cover fixed costs.
• D)lower the benefit of conducting a sensitivity analysis.

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Definitions:

Adjusting Entries

Entries made in accounting to update the records for any incomes and expenses that have been incurred but not yet recorded.

Financial Statements

Structured reports detailing the financial performance, position, and cash flows of an organization, typically including the balance sheet, income statement, and statement of cash flows.

Accounting Cycle

The series of steps followed by an entity to track and manage its financial transactions, from the initial transaction recording to the final financial statement preparation and closing entries.

Closing

The process of finalizing accounts at the end of an accounting period by summarizing revenues and expenses and indicating net profit or loss.