Multiple Choice Question : Please select all of the following that are true regarding cost structure : The break even point is where the net benefit from total sales is equal to fixed cost. The more specific a fixed cost is a type of cell the less sunk the cost will be. As sales (Q) decline total cost remain constant. JAfter the breakeven quantity is reached (expanding sales), profit increase over increasing quantity. The net benefit from each sale is the contribution margin of the firm. When the cost structure tips toword VC, the contribution margin is lower, so there is more risk from business failure scenes sunk cost are likely higher.
Multiple Choice Question : Please select all of the following that are true regarding cost structure : The break even point is where the net benefit from total sales is equal to fixed cost. The more specific a fixed cost is a type of cell the less sunk the cost will be. As sales (Q) decline total cost remain constant. JAfter the breakeven quantity is reached (expanding sales), profit increase over increasing quantity. The net benefit from each sale is the contribution margin of the firm. When the cost structure tips toword VC, the contribution margin is lower, so there is more risk from business failure scenes sunk cost are likely higher.
Chapter1: Making Economics Decisions
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Transcribed Image Text:Multiple Choice Question :
Please select all of the following that are true regarding cost structure :
The break even point is where the net benefit from total sales is equal to fixed cost.
The more specific a fixed cost is a type of cell the less sunk the cost will be.
As sales (Q) decline total cost remain constant.
After the breakeven quantity is reached (expanding sales), profit increase over increasing quantity.
The net benefit from each sale is the contribution margin of the firm.
When the cost structure tips toword VC, the contribution margin is lower, so there is more risk from business failure scenes sunk cost are likely higher.
Within each range of constant total fixed cost and constant variable cost per unit, total cost per unit decline (a.k.a Economics of scale).
When cost structure tips toward FC, the contribution margin is higher (easy to breakeven) but the break even point is higher as well due to higher FC ( more difficult to break even).
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