When a Firm Uses Average Total Cost Pricing

question 147

Multiple Choice

When a firm uses average total cost pricing,

• A)above-normal profits are made.
• B)economic profits equal zero.
• C)there is not enough money to pay investors in the firm their opportunity costs.
• D)price equals marginal cost.
• E)there is not enough money to pay the managers.

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Definitions:

Fixed Manufacturing Overhead

The total of all manufacturing costs that do not vary with the level of production, such as rent, salaries, and insurance.

Reconciliation

The process of ensuring that two sets of records or financial accounts are in agreement, often used in accounting to match transactions.

Super-Variable Costing

No real financial accounting term aligns exactly with "Super-Variable Costing"; may be a mistaken or niche term.

Variable Costing

An accounting method that considers only variable costs in determining the cost of goods sold and evaluates profitability.