Questioned Costs That May Not Reflect the Actions That a Prudent

question 14

Multiple Choice

Questioned costs that may not reflect the actions that a prudent person would take under the circumstances are

• A) Unallowable costs.
• B) Unreasonable costs.
• C) Unapproved costs.
• D) Undocumented costs.

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Definitions:

Marginal Revenue

is the additional income generated from selling one more unit of a product or service, crucial for understanding profitability and making production decisions.

Economic Profit

The difference between total revenue and total costs, including both explicit and opportunity costs, reflecting the additional gain or loss from a business decision.

Average Total Cost

The cost of producing each unit, calculated by dividing the overall production cost by the quantity of units made.

Marginal Cost

The extra expense that arises when one more unit of a product or service is produced.