Select the Incorrect Statement Regarding Cost Structures

question 32

Multiple Choice

Select the incorrect statement regarding cost structures.

• A) Highly leveraged companies will experience greater profits than companies less leveraged when sales increase.
• B) The more variable cost, the higher the fluctuation in income as sales fluctuate.
• C) When sales change, the amount of the corresponding change in income is affected by the company's cost structure.
• D) Faced with significant uncertainty about future revenues, a low leverage cost structure is preferable to a high leverage cost structure.

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Definitions:

Variable Cost

Expenditures that adjust based on the volume of output or services provided by a business.

Hourly Wages

The amount of money paid to an employee for each hour of work performed.

Total Costs

The aggregate amount of spending involved in generating goods or services, factoring in both stable and changeable costs.

Variable Costs

Variable costs are expenses that vary directly with the level of production or sales volume, such as materials and labor.