Given the Total Cost Function TC = a + BQ,with

question 225

Multiple Choice

Given the total cost function TC = a + bQ,with both a > 0 and b > 0,average cost will

• A) be approximately constant over most of the output range.
• B) fall at first and then rise as output rises.
• C) fall over the entire range of output.
• D) rise at first and then fall as output rises.
• E) rise over the entire range of output.

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Definitions:

Direct Materials

Raw materials that are directly incorporated into a finished product and are easily traceable to specific goods or services.

Fixed Factory Overhead

Refers to the consistent, non-variable costs associated with operating a manufacturing facility, such as rent, salaries, and utility expenses.

Static Budget

A budget that remains unchanged over the budget period and is not adjusted for actual levels of activity.

Flexible Budget

A budget that adjusts or varies with changes in the volume of activity, production levels, or other operational factors.