The Greater the Ratio of Variable Costs to Sales, The

question 70

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 charges
• D)Lower the benefit of conducting a sensitivity analysis

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Definitions:

Production Possibility Frontier

A curve depicting all maximum output possibilities for two or more goods given a set of inputs (resources), assuming all resources are fully utilized.

Opportunity Costs

The penalty of overlooking the next most advantageous option when a choice is made.

Efficient

Achieving maximum productivity with minimum wasted effort or expense.

Production Possibility Frontier

A graphical representation showing the maximum combination of goods and services that can be produced using all available resources efficiently.