Some Managers Prefer to Use Cost Rather Than Market Price

question 81

Multiple Choice

Some managers prefer to use cost rather than market price in controlling transfers between divisions.If cost is to be used,then it should be

• A)full cost.
• B)direct cost.
• C)variable cost.
• D)standard cost.
• E)absorption cost.

---

Definitions:

AVC (Average Variable Cost)

The total variable cost divided by the quantity of output produced; it varies with production.

MC (Marginal Cost)

Marginal Cost is the change in total cost that arises when the quantity produced is incremented by one unit.

Shutdown Point

The level of operations at which a company or business does not generate enough revenue to cover its variable costs, leading to a temporary or permanent closure.

AVC (Average Variable Cost)

The total variable costs (costs that vary with the level of output) divided by the quantity of output produced, representing the variable cost per unit.