If Marginal Cost Is Less Than Average Total Cost

question 54

Multiple Choice

If marginal cost is less than average total cost,

• A)marginal cost must be falling
• B)average total cost must be increasing
• C)average variable cost equals average total cost
• D)average variable cost must be decreasing
• E)average variable cost may be increasing or decreasing

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Definitions:

Fixed Factory Overhead Volume Variance

The difference between the budgeted and actual fixed overhead costs attributed to variations in production volume.

Gross Profit

The financial difference between revenue and the cost of goods sold before other expenses are deducted.

Fixed Factory Overhead Rate

A predetermined rate used to allocate fixed overhead costs to produced goods based on a consistent basis, such as labor hours or machine hours.

Fixed Factory Overhead Volume Variance

A measure used in cost accounting to determine the difference between the budgeted and actual volume of production, affecting the allocation of fixed overhead costs.