When a greater proportion of costs are fixed costs, then ________.
A) a small increase in sales results in a small decrease in operating income
B) when demand is low the risk of loss is high
C) a decrease in sales reduces the total fixed cost per unit
D) a decrease in sales reduces the cost per unit

Question

Quizplus · Accepted Answer

When a greater proportion of costs are fixed, the risk of loss is higher during periods of low demand because fixed costs must be covered regardless of sales volume.

When a Greater Proportion of Costs Are Fixed Costs, Then