Prudence Company Incurs Both Fixed and Variable Production Costs

question 104

Multiple Choice

Prudence Company incurs both fixed and variable production costs.Assuming that production is within the relevant range,if volume goes up by 28%,then the total fixed costs would ________.

• A)increase by 28%
• B)remain the same
• C)increase by an amount less than 28%
• D)decrease by 28%

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Definitions:

Sales Increase

A rise in the amount of goods or services sold, often measured as a percentage increase over a previous period.

Contribution Format

A method of income statement presentation that stresses the contribution margin, which is sales revenue minus variable costs.

Income Statement

A financial statement that shows a company’s revenues and expenses over a specific period, resulting in net profit or loss.

Net Operating Income

The total profit a company makes from its operations, excluding taxes and interest.