If Total Costs Remain the Same, the Smaller the Proportion

question 28

Multiple Choice

If total costs remain the same, the smaller the proportion of fixed costs in a firm's cost structure

• A) the greater the impact on profit from a percentage change in sales volume.
• B) the smaller the impact a percentage change in sales volume will have on profit.
• C) the lower the contribution margin.
• D) the smaller the impact a percentage change in sales volume will have on profit AND the lower the contribution margin.

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Definitions:

Rate Of Inflation

The increase speed of overall service and product prices, which in turn, lowers the capacity to make purchases.

Probability Range

This term describes the spread within which a particular event is expected to occur, expressed in terms of probability.

Loss Chance

The probability or likelihood that an investment will yield a return lower than the original investment.

Capital Gains

The profit from the sale of an asset or investment, where the sale price exceeds the purchase price.