If a company changes from a labor-intensive system that incurs significant hourly wage cost to an automated system that increases fixed cost,the total cost line on the company's cost-volume-profit graph will shift up and have a steeper slope.

Question

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The total cost line will shift up due to the increase in fixed costs, but it will have a flatter slope because the variable costs (e.g., hourly wages) decrease with automation, leading to a lower cost per additional unit produced.

If a Company Changes from a Labor-Intensive System That Incurs