A. An increase in sales does not necessarily mean that there is a rise in material or labor cost. We must know what the inventory level is at the particular time of the rise in sales. If the inventory levels do not permit or coincide with the sales figures, we can assume that there is some rise in certain costs; such as direct labor. The rise in costs would be direct labor depending on what the output or the maximum capacity rating (MCR). If the increase in sales rises, is the company able to produce these products in the normal time? …
