Select the Incorrect Statement Regarding the Relationship Between Cost Behavior

question 79

Multiple Choice

Select the incorrect statement regarding the relationship between cost behavior and profits.

• A) A pure variable cost structure offers higher potential rewards.
• B) A pure fixed cost structure offers more security if volume expectations are not achieved.
• C) In a pure variable cost structure, when revenue increases by $1, so do profits.
• D) In a pure fixed cost structure, the unit selling price and unit contribution margin are equal.

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Definitions:

Note Payable

A written promise to pay a specified amount of money, typically including interest, by a certain date.

Operating Cycle

The amount of time it takes for a company to purchase inventory, sell it, and convert the sales back into cash.

Interest Expense

The cost incurred by an entity for borrowed funds, representing interest payments made or accrued on outstanding debts.

Income Statement

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