Which of the Following Statements Regarding Differential Costs Is (Are)

question 127

Multiple Choice

Which of the following statements regarding differential costs is (are) false?
(A) The full-cost fallacy occurs when a decision-maker fails to include fixed manufacturing overhead in the product's cost.
(B) When deciding whether or not to accept a special order, a decision-maker should focus on differential costs instead of full costs.

• A) Only A.
• B) Only B.
• C) Neither A nor B is false.
• D) Both A and B are false.

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Definitions:

Industry Supply

The total quantity of a specific good or service that all firms in an industry are willing to sell at a given price level.

Demand

The quantity of a good or service that consumers are willing and able to purchase at various prices during a specified time period.

Marginal Revenue

The additional revenue that a firm generates from selling one more unit of a good or service.

Average Total Cost

The total cost to produce a given quantity of output divided by the number of units produced, representing the per-unit cost of production.