Allocating Common Fixed Expenses to Business Segments

question 72

Multiple Choice

Allocating common fixed expenses to business segments:

• A) may cause managers to erroneously discontinue business segments.
• B) may cause managers to erroneously keep business segments that should be dropped.
• C) ensures that all costs are covered.
• D) helps managers make good decisions.

---

Definitions:

Pure Competition

A market structure characterized by a large number of small firms, identical products, and free entry and exit, leading to price-taking behavior.

Nonprice Competition

Competition based on distinguishing one’s product by means of product differentiation and then advertising the distinguished product to consumers.

Real Characteristics

The tangible and genuine attributes or qualities that define an entity, object, or condition without distortion by perceptions or other external factors.

Product Promotion

The act of marketing or advertising a product to increase awareness or sales.