When Fixed Operating Costs Are Incurred by the Firm, a Relative

question 196

Multiple Choice

When fixed operating costs are incurred by the firm, a relative change in ____ is magnified into a larger relative change in earnings before interest and taxes.

• A)overhead expenses
• B)interest charges
• C)labor costs
• D)sales revenue

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Definitions:

Invested

Funds or resources allocated for the purpose of generating income or profit.

Interest

The amount paid by a borrower to a lender over a period of time for the use of money, expressed as a percentage of the principal.

Months

Units of time in calendars that approximately correspond to the period of the Earth moving in its orbit around the Sun, usually divided into 12 periods in a year.

Deposit

Money placed into a financial institution for safekeeping, which can earn interest depending on the account type.