Companies a and B Are in the Same Industry and Are

question 61

Multiple Choice

Companies A and B are in the same industry and are identical except for cost structure.At a volume of 50,000 units,the companies have equal net incomes.At 60,000 units,Company A's net income would be substantially higher than B's.Based on this information,

• A) Company A's cost structure has more variable costs than B's.
• B) Company A's cost structure has higher fixed costs than B's.
• C) Company B's cost structure has higher fixed costs than A's.
• D) At a volume of 50,000 units, Company A's magnitude of operating leverage was lower than B's.

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Definitions:

Contrast Error

A type of appraisal or judgment bias where the evaluation of one person is unduly influenced by the comparison with another that has recently been appraised.

Problem-Solving Approach

A methodical process of identifying a problem, brainstorming solutions, and implementing the most effective resolution.

Feedback

Information provided regarding aspects of one’s performance or understanding, which can be used as a basis for improvement.

Halo Error

A bias in performance appraisals where an evaluator's overall impression of an individual, positive or negative, influences the assessment of specific traits or behaviors.