The Following Graph Shows Average Fixed Costs, Average Variable Costs

question 9

Multiple Choice

The following graph shows average fixed costs, average variable costs, average total costs, and marginal costs of production. Average variable cost is minimized when output equals:

• A) 12 units.
• B) 6 units.
• C) 21 units.
• D) 25 units.

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Definitions:

Units-Of-Output Method

A depreciation method that allocates the cost of an asset over its useful life based on the units it produces, reflecting usage rather than mere passage of time.

Depreciation Expense

An accounting method that systematically allocates the cost of a tangible asset over its useful life.

Commercial Substance

A situation in future cash flows of a business that are expected to change significantly due to a transaction, indicating the transaction has economic impact.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a company's assets over time.