Buying Multiperiod Activity Capacity Is Often Done by Paying Cash

question 54

Multiple Choice

Buying multiperiod activity capacity is often done by paying cash up front and is always:

• A)relevant because it is a variable cost.
• B)relevant because it could reduce future costs.
• C)irrelevant because it is a sunk cost.
• D)relevant because it generates future revenues or benefits.

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Definitions:

Margin of Safety Percentage

The ratio that shows how much sales can decline before a business reaches its break-even point, expressed as a percentage.

Unit Variable Cost

The cost that varies with each unit produced, including materials and labor directly associated with production.

Marketing Manager

A professional responsible for overseeing the promotion and sales strategy of products or services.

Break-Even Point

The point at which the amount of goods produced or sold matches the total costs, leading to no profit or loss.