High degree of operating leverage signals the existence of a high portion of variable costs True O False
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- Understand thedifferences between variablecosts and fixed costs.The simplifying assumption that costs and volume vary in straight-line relationships makes the analysis of cost behav-ior much easier. What factors make this a reasonable and useful assumption in many cases?Increasing variable cost while decreasing fixed cost
- In order to have differential costs, only variable costs are allowed. Do you think so? Explain.The concept of operating leverage involves the use of __________ to magnify returns at high levels of operation. Multiple Choice fixed costs variable costs marginal costs semi-variable costsExplain how the high-low method determines:a. The variable portion of a semivariable cost.b. The fixed portion of a semivariable cost.
- What is the scattergraph method, and why is it used? Why is a scattergraph a good first step in separating mixed costs into their fixed and variable components?When output volume increases, do variable costs per unit increase, decrease, or stay the same within the relevant range of activity? Explain.Absorption costing is more compatible with cost-volume-profit analysis than is variablecosting.TRUEFALSE