If a Company Reduces Its Fixed Costs, the Operating Income

question 47

True/False

If a company reduces its fixed costs, the operating income will increase in the exact same amount as the cost reduction.

---

Definitions:

Activity Variance

The difference between planned activity costs and actual activity costs in managerial accounting, used for budget control and performance evaluation.

Fixed Cost

Expenses that do not change with the level of production or sales over a short period, such as rent, salaries, and insurance premiums.

Variable Cost

Expenditures that fluctuate with production output, including ingredients, packaging, and labor directly involved in production.

Vehicle Operating Cost

Expenses related to the operation of a vehicle, including fuel, maintenance, and repairs.