When a Greater Proportion of Costs Are Fixed Costs, Then

question 184

Multiple Choice

When a greater proportion of costs are fixed costs, then:

• A)a small increase in sales results in a small decrease in operating income
• B)when demand is low the risk of loss is high
• C)when demand is high the breakeven point is increased
• D)a decrease in sales reduces the cost per unit

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Definitions:

Per-unit Cost

The cost incurred for producing a single unit of a product, which is calculated by dividing the total cost of production by the total number of units produced.

Monopolistic Firm

A company that has exclusive control over a particular market or industry, limiting competition.

Government Regulation

Rules set by the government to control the way businesses can operate within an economy.

Production Costs

The expenses incurred during the process of creating a good or service, including labor, materials, and overhead costs.