Which One of the Following Statements Is True

question 103

Multiple Choice

Which one of the following statements is true?

• A)Financial statement readers cannot determine whether the depreciation method used by a company is appropriate.
• B)Financial statement readers can determine the useful lives of assets depreciated during the reported period.
• C)Financial statement readers cannot determine the depreciation expense for the reported period.
• D)Financial statement readers can accurately estimate the effect an alternative depreciation method would have on income.

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Definitions:

Shut-down Point

The level of operation at which a firm's total revenue is equal to its total variable costs, below which it is more beneficial for a firm to cease production.

Average Variable Cost

The variable cost (cost that changes with production volume) divided by the quantity of output produced.

Profit-maximizing

Refers to the process by which a company determines the price and output level that returns the greatest profit.

MR = MC

An economic principle stating that optimal production level is reached when marginal revenue equals marginal cost.