If a Firm Doubled Its Level of Fixed Costs but Maintained

question 40

Multiple Choice

If a firm doubled its level of fixed costs but maintained its operating leverage,then one explanation may be that:

• A) depreciation expense increased to offset the increase.
• B) sales revenue also doubled and the proportion of variable costs did not change.
• C) sales revenues declined and the proportion of variable costs doubled.
• D) pretax profits decreased.

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Definitions:

Self-mutilation

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A mental health disorder characterized by unstable moods, behaviors, and relationships.

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A comprehensive cognitive-behavioral treatment that emphasizes individual psychotherapy and group skills training classes to help people manage emotional instability and interpersonal difficulties.