When Considering the Phases of Adjustment and Response to Operating

question 47

Multiple Choice

When considering the phases of adjustment and response to operating exposure in the LONG RUN, price changes tend to be ________ and volume changes tend to be ________.

• A) fixed/contracted; contracted.
• B) fixed/contracted; completely flexible.
• C) completely flexible; completely flexible.
• D) completely flexible; contracted.

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Definitions:

Long-Term Decisions

Decisions made by management that are expected to have implications for the company over several years, often relating to strategic planning, investments, and organizational structure.

Fixed Costs

Rent, salaries, and insurance are examples of expenses unaffected by changes in production or sales levels.

Variable Costs

Expenditures that fluctuate in accordance with the amount of products made or sold.

Inventoriable Costs

Expenses directly connected to the production of goods that are initially recorded as inventory and expensed as cost of goods sold when the goods are sold.