If a company decreases both the variable expense per unit and total fixed expenses, while keeping...
If a company decreases both the variable expense per unit and total fixed expenses, while keeping selling price the same, which of the following is NOT true?
| A. |
The point at which the total expenses and total sales lines intersect will shift rightward |
|
| B. |
The loss area will become smaller |
|
| C. |
The total expense line will have a smaller y-intercept |
|
| D. |
The total expense line will have a flatter slope |
Homework Answers
Answer:
Lets say:
| Scenario A | Scenario B (after decrease cost) | |
| Sales price per unit | 10 | 10 |
| Fixed Cost | 100 | 60 |
| Variable cost per unit | 5 | 3.5 |
Scenario A Graph would look like: (X axis is Units sold and Y axis is Sales price, fixed cost and total cost)
Scenario B Graph would look like: (X axis is Units sold and Y axis is Sales price, fixed cost and total cost)
Now looking at the options, All three except option A are true. Since Loss area has been shifted to leftward from 1st graph to 2nd graph whereas option says it moves to rightward.
Therefore, option A will be our answer.
Add Answer to:
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