Final answer:
A pure variable cost structure offers higher potential rewards, whereas a pure fixed cost structure offers more security if volume expectations are not achieved. In a pure variable cost structure, profits increase by $1 when revenue increases by $1. In a pure fixed cost structure, the unit selling price and unit contribution margin are equal.
Step-by-step explanation:
In the relationship between cost behavior and profits, a pure variable cost structure offers higher potential rewards. This is because variable costs are directly tied to the level of production and can be easily adjusted to maximize profits. On the other hand, a pure fixed cost structure offers more security if volume expectations are not achieved, as fixed costs remain the same regardless of production levels.
In a pure variable cost structure, when revenue increases by $1, profits also increase by $1. This is because variable costs are directly proportional to revenue and do not change relative to sales.
In a pure fixed cost structure, the unit selling price and unit contribution margin are equal. This means that all revenue from each unit sold directly contributes to covering fixed costs and any additional units sold beyond the breakeven point contribute to profits.