Companies with a greater proportion of fixed costs have a greater risk of loss from changes in demand than companies with a greater proportion of variable costs.

Question

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Companies with a greater proportion of fixed costs have a higher breakeven point, which means they need to generate a certain level of revenue to cover their costs. If demand decreases, they may not be able to generate enough revenue to cover their fixed costs, resulting in losses. In contrast, companies with a greater proportion of variable costs can adjust their costs to changes in demand, reducing their risk of loss.

Companies with a Greater Proportion of Fixed Costs Have a Greater