The correct answer is definitely C. As a finance major, I can tell you that this is a classic concept in managerial accounting. Gotta love those fixed vs. variable costs!
C seems like the most logical answer here. The fixed compensation costs will become a smaller percentage of the total revenue as the company grows, so profit margins should improve.
Haha, this question is a real brain-teaser! I'm going to go with C, but I wouldn't be surprised if the answer is actually 'all of the above' and the exam is just trying to trick us.
I agree with both of you. It's definitely a tricky question, but I think the key is to consider how fixed and variable compensation costs would change as revenues increase.
I'm leaning towards A, because I believe that compensation costs should eventually stabilize and become a consistent percent of revenue as the company grows.
I think you might be onto something with C. It makes sense that as revenues increase, fixed compensation costs would eventually decrease as a percent of revenue.
I think the correct answer is C. As revenues increase, the fixed compensation costs will become a smaller percentage of the total revenue, leading to increased profit growth.
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