When a Greater Proportion of Costs Are Fixed Costs, Then

question 46

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) a decrease in sales reduces the total fixed cost per unit
• D) a decrease in sales reduces the cost per unit

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Definitions:

Functional Departmentation

Is grouping individuals by skill, knowledge, and action.

Grouping of Individuals

The organization or classification of people into groups based on shared characteristics, objectives, or interests.

Formalization

The extent to which an organization's procedures, policies, and rules are written and strictly followed.

Allowable Actions

Those actions or behaviors that are permitted within a given set of rules, regulations, or contexts.