A Proposal Has Been Made That Will Lower Variable Expenses

question 15

Multiple Choice

A proposal has been made that will lower variable expenses in Store A to 62% of sales. However, this reduction can only be accomplished by an increase in Store A's traceable fixed expenses of $8,000. If this proposal is implemented and sales remain constant, overall company net operating income should:

• A)remain the same
• B)decrease by $4,200
• C)increase by $2,000
• D)increase by $8,000

Know the principles guiding the recognition of revenue and expenses.

Comprehend the fundamental accounting equation and its components (Assets = Liabilities + Equity).

Recognize the nature and classification of assets, liabilities, and equity.

Calculate equity given assets and liabilities.

---

Definitions:

Availability Heuristic

A cognitive shortcut that relies on immediate examples that come to a person's mind when evaluating a specific topic, concept, method, or decision.

Representativeness Heuristic

Assumption that any object (or person) sharing characteristics with the members of a particular category is also a member of that category.

Divergent

Thinking or problem solving that involves exploring many possible solutions; often associated with creativity.

Disordered

Characterized by disruption or dysfunction, especially in mental health, leading to distress or difficulty in functioning normally.