If the historical data shows that when sales of a firm increase by a very high p
ID: 2743226 • Letter: I
Question
If the historical data shows that when sales of a firm increase by a very high percentage but its total operating costs change by a significantly much smaller percentage, it indicates that the firm has:
high fixed costs in its operating costs
low fixed costs in its operating costs
no fixed costs in its operating costs
unpredictable fixed costs in its operating costs
high fixed costs in its operating costs
low fixed costs in its operating costs
no fixed costs in its operating costs
unpredictable fixed costs in its operating costs
Explanation / Answer
Answer - A
High fixed costs in its operating costs.
In the case of varaible costs it changes in propotionate to the sales percentage here change in opertaing costs happened but in low level so it possible only when there was high fixed cost in operating costs.