Question

Knowing the behavior pattern of a cost is important to determine the effect on net income of a change in sales volume because as sales volume increases or decreases: a. variable costs will not change. b. net income will change proportionately. c. the effect on net income will depend on the behavior pattern of various costs. d. fixed costs will rise proportionately.

Answer 1

Answer:

c. the effect on net income will depend on the behavior pattern of various costs.

Explanation:

When sales volume increases or decreases, to determine the effect of this on net income it is important know the behavior pattern of a cost because costs also affect the net income and they have show different patterns. Variable costs will increase or decrease according to the variation of the quantities sold and fixed cost tend to stay the same. However, they may change if, for example, it is necessary to rent a bigger space to be able to increase production and this increase in a fixed cost might take the effect in the net income of an increase in the sales volume.  So, understanding this type of behavior is important to understand how changes in sales volume can affect the net income.