When Output Is 500, a Firm's Fixed Costs Are $10,000

question 12

Multiple Choice

When output is 500, a firm's fixed costs are $10,000 and its variable costs are $15,000. The firm's total costs are therefore:

• A) $ 5,000.
• B) $10,000.
• C) $15,000.
• D) $25,000.

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Definitions:

Accumulated Depreciation

The cumulative depreciation of an asset up to a single point in its life, representing the wear and tear or obsolescence.

Operating Lease

A lease agreement that does not transfer the risks and rewards of ownership, treated as a rental expense in the lessee's income statement.

Direct Financing Lease

A type of lease where the lessor records the present value of lease payments as a receivable, effectively transferring all risks and rewards of ownership.

Direct Financing Lease

A lease arrangement in which the lessor purchases an asset for the lessee and earns interest income over the lease term while the lessee uses the asset.