Question

Which of the following statements is true?

a. Gross profit margin and operating profit margin are complements of each other and the two percentages add up to 100%.
b. In capital intensive industries sales volume changes result in a stable gross profit margin.
c. In stable industries, such as retailers, the gross profit margin is generally volatile from year to year.
d. Fixed costs do not vary proportionately with volume changes but remain the same within a relevant range of activity.

Answer 1

The correct statement is d. Fixed costs do not vary proportionately with volume changes but remain the same within a relevant range of activity.

Step-by-step explanation:

The correct statement is d. Fixed costs do not vary proportionately with volume changes but remain the same within a relevant range of activity.

Fixed costs are costs that do not change with the level of production or sales volume. They remain constant within a certain range of activity. Examples of fixed costs include rent, salaries, and insurance.

On the other hand, variable costs are costs that change in proportion to the level of production or sales volume. Examples of variable costs include raw materials, direct labor, and sales commissions.