Sun Company and Moon Company are identical in all respects except that most of Sun company...

Sun Company and Moon Company are identical in all respects except that most of Sun company costs are variable, and most of Moon company costs are fixed. In case sales increase (for both companies), which of the two companies will tend to realize the greatest increase in its net income?

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Answer-

Variable cost: Varaiable cost are cost which increase with the increase in production of product. This cost is linked directly with the production of Product.

Fixed cost: Fixed cost are the cost which is not subject change irrespective of no. of units produced.

The below mentioned example's results is due to the natures of variable and fixed costs.

For analysing it further we have attached a numerical based exmple, Please find this example for detailed answer,

Please comment for any other exlplanation,

Thanks,

ekkarill92 answered 2 years ago

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