Thompson Company manufactures and sells cookware. Because of current trends, it expects to increase sales by 15% next year. If this expected level of production and sales occurs and plant expansion is not needed, how should this increase affect next year's total amounts for the following costs?Variable Costs Fixed Costs Mixed Costs
A) increase increase increase
B) increase no change increase
C) no change no change increase
D) decrease increase increase

Question

Thompson Company manufactures and sells cookware. Because of current trends, it expects to increase sales by 15% next year. If this expected level of production and sales occurs and plant expansion is not needed, how should this increase affect next year's total amounts for the following costs?​Variable Costs Fixed Costs Mixed Costs
A) increase increase increase
B) increase no change increase
C) no change no change increase
D) decrease increase increase

Quizplus · Accepted Answer

Variable costs will increase with increased production and sales since they vary directly with the level of production. Fixed costs will not change because they do not vary with the level of production or sales. Mixed costs will increase because they contain a variable component that will increase with higher production and sales, even though their fixed component will not change.

Thompson Company Manufactures and Sells Cookware