Asked by Katie Flynn on May 14, 2024
Verified
If direct materials cost per unit decreases, the amount of sales necessary to earn a desired amount of profit will decrease.
Direct Materials Cost
The cost of raw materials directly used in the production of products or services.
Sales
Revenue generated from the sale of goods or services.
Desired Profit
The target earnings a company aims for in a specific period as part of its financial and strategic planning.
- Apply knowledge of cost behavior to evaluate changes in cost structures and their impact on a company’s financial health.
- Identify the influence of changes in cost elements on a firm's profitability.
Verified Answer
DL
destiny leggetteMay 15, 2024
Final Answer :
True
Explanation :
When direct materials cost per unit decreases, the total cost of production decreases, which means that the selling price can be decreased as well to maintain the same profit margin. This, in turn, will decrease the amount of sales necessary to earn the desired amount of profit.
Learning Objectives
- Apply knowledge of cost behavior to evaluate changes in cost structures and their impact on a company’s financial health.
- Identify the influence of changes in cost elements on a firm's profitability.
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