Assuming That Sales and Net Operating Income Remain the Same,a

question 7

Multiple Choice

Assuming that sales and net operating income remain the same,a company's return on investment will:

• A) increase if average operating assets increase.
• B) decrease if average operating assets decrease.
• C) decrease if turnover decreases.
• D) decrease if turnover increases.

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Definitions:

Unit Contribution Margin

The difference between the selling price per unit and the variable cost per unit.

Fixed Costs

Expenses that remain constant regardless of the amount of production or sales, including rent, wages, and insurance premiums.

Mixed Cost

A cost that contains both fixed and variable components and changes with the level of output but not directly in proportion.

Fixed Cost Element

A component of total costs that does not change with the level of output or activity within a certain range.