A cost structure which relies more heavily on fixed costs makes the company
A) more sensitive to changes in sales revenue.
B) less sensitive to changes in sales revenue.
C) either more or less sensitive to changes in sales revenue, depending on other factors.
D) have a lower break-even point.

Question

Quizplus · Accepted Answer

A cost structure that relies more heavily on fixed costs means that a significant portion of costs is incurred regardless of sales revenue. As a result, any decrease in sales revenue can have a larger impact on the company's profitability, making it more sensitive to changes in sales revenue.

A Cost Structure Which Relies More Heavily on Fixed Costs