When forecasting income statements, which of the following is generally a key assumption firms make about their variable operating costs?
A)Variable operating costs remain the same each year.
B)Variable operating costs increase at the same rate as sales.
C)Variable operating costs are forecast to be the average of the operating costs during the previous three years.
D)Variable operating costs decrease when sales increase.
E)Variable operating costs are set at industry averages.

Question

Quizplus · Accepted Answer

Firms generally assume that variable operating costs will increase at the same rate as sales because as sales increase, there will be a proportional increase in costs associated with producing and delivering the goods or services sold.

When Forecasting Income Statements, Which of the Following Is Generally