Asked by Zachary Robert on Jun 30, 2024
Verified
If managers are reluctant to lay off direct labor employees when activity declines leads to a decrease in the ratio of variable to fixed costs.
Variable To Fixed Costs
The process of converting costs that vary with production volumes into costs that remain constant regardless of volume.
Direct Labor
Workers or employees who are directly involved in the production of goods or services, whose labor can be easily traced to the product.
- Recognize the distinctions between variable, fixed, and mixed costs, especially regarding their reactions to shifts in levels of activity.
- Comprehend the behavior of committed fixed costs in the short-term and their influence on managing expenses.
Verified Answer
NC
Nelly ChahineJun 30, 2024
Final Answer :
True
Explanation :
When managers are reluctant to lay off direct labor employees, the fixed costs stay constant while the variable costs decrease due to the decrease in activity. This results in a decrease in the ratio of variable to fixed costs.
Learning Objectives
- Recognize the distinctions between variable, fixed, and mixed costs, especially regarding their reactions to shifts in levels of activity.
- Comprehend the behavior of committed fixed costs in the short-term and their influence on managing expenses.