47. To find the percentage by which operating income will change, we multiply th

Question

47. To find the percentage by which operating income will change, we multiply the This works for both percentage change in volume by the and in volume. 48. When choosing between alternative cost structures, managers find it helpful to calculate which is the volume of sales that would generate the total cost under either alternative. 49. How do managers calculated the indifference point? 50. To choose the most profitable cost structure, when volume is expected to be lower than the indifflerence point, managers should choose the option with the

Explanation / Answer

47. (i)percentage change in price (ii) change in selling price (iii) change in volume

48. (i) indifference point (ii) same profits and same total cost

49. Indifference point is the level of sales at which the total costs (and hence total profits) of the two options are equal. the decision-maker is indifferent as to the option chosen, since both options will result in the same amount of profit. it is also called as the cost break even point.

Indifference point = difference in fixed costs/difference in variable cost per unit

50. lower fixed costs.

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