When Using the Bardahl Formula, an Increase in Accounts Payable

question 17

Multiple Choice

When using the Bardahl formula, an increase in accounts payable (while holding purchases and operating expenses constant) has which of the following effects on the working capital requirements?

• A) decrease
• B) increase
• C) no effect
• D) increase, decrease, or no effect, depending on other factors

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Definitions:

Average Variable Cost

The cost of labor and materials divided by the quantity of output, representing the variable cost per unit of production.

Total Variable Cost

The sum of all costs that vary with output level, including costs such as labor and raw materials.

Average Total Cost

The total cost of production (fixed and variable costs combined) divided by the total quantity of output produced.

Marginal Cost

The price of creating one more unit of a particular product or service.