Exhibit 7-6 -Given the Information in Exhibit 7-6, What Is Fixed Cost

question 189

Multiple Choice

Exhibit 7-6

-Given the information in Exhibit 7-6, what is fixed cost?

• A) $0
• B) $200
• C) $500
• D) fixed cost depends on output level
• E) we cannot calculate fixed cost without knowing which inputs are fixed

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Definitions:

Relevant Range

The range of activity within which the assumptions about fixed costs and variable cost behavior hold true.

Production

The process of creating goods and services through the combination of human labor, materials, and technology.

Cost Estimation

The process of forecasting the costs associated with a project or production, taking into consideration all relevant variables.

Least Squares Regression

A statistical method used to determine a line of best fit by minimizing the sum of squares of the differences between observed and predicted values.