Ruben, Inc

question 146

Multiple Choice

Ruben, Inc. is a management consulting firm specializing in pension plans. Its billing rate to clients is $120 per hour, and variable costs average $80 per hour. Fixed costs are $24,000 per month. The income tax rate is 20%.
If fixed costs increase by 10% and management increases its billing rate by 10%, what is the effect on the breakeven point, in billable hours?

• A) It increases the breakeven point
• B) The breakeven point will not change
• C) It decreases the breakeven point
• D) Cannot be determined

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Definitions:

Rational Structure

An organizational design that emphasizes a well-defined hierarchy, clear roles, and formal procedures and guidelines.

Formal Authority

Refers to the power granted to an individual or a position through organizational structures and official job descriptions.

Mechanistic Designs

Organizational structures characterized by clear hierarchies, rigid departments, and strict adherence to rules, enhancing efficiency in stable environments.

Loose Structures

Organizational frameworks characterized by flexibility, informal communication, and adaptable roles, often in contrast to rigid, hierarchical structures.