Suppose a Firm Is Trying to Decide Whether to Temporarily

question 54

Multiple Choice

Suppose a firm is trying to decide whether to temporarily shut down to minimize total loss.If price equals average variable cost and the firm continues to produce,

• A)total revenue equals total fixed cost,and the loss equals total variable cost.
• B)total revenue equals total variable cost,and the loss equals total fixed cost.
• C)total fixed cost is zero.
• D)total variable cost equals total fixed cost.
• E)total cost equals total variable cost.

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Definitions:

Accrued Interest

Interest that has been incurred but not yet paid at the end of a period.

Adjusting Entry

An accounting record made to update the financial statements to reflect transactions that have occurred but are not yet recorded.

Interest Expense

The cost incurred by an entity for borrowed funds, usually presented as an expense in the income statement.

Times Interest Earned Ratio

A metric that measures a company's ability to meet its debt obligations by comparing income before interest and taxes to interest expenses.