In the Long Run, a Firm Should Shut Down If

question 87

True/False

In the long run, a firm should shut down if it cannot cover its average total costs.

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Definitions:

Supplies Inventory

Items held in stock by a business, such as office supplies or maintenance materials, not directly used in manufacturing but necessary for operations.

Factory Overhead

All indirect costs associated with manufacturing, excluding direct materials and direct labor.

Direct Labor Hours

The total hours of labor spent by workers who are directly involved in the manufacturing process of a product.

Overapplied Manufacturing Overhead

Occurs when the allocated amount for manufacturing overhead costs exceeds the actual overhead costs incurred.