The Limitations of the Profit Maximization Goal Include Which of the Following

question 38

Multiple Choice

The limitations of the profit maximization goal include which of the following?

• A) It lacks a time dimension (i.e., it is static).
• B) It fails to consider risk with alternative decisions.
• C) The definition of profit is ambiguous.
• D) All the above are limitations.

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Definitions:

Gross Margin

A financial measurement that calculates the difference between a company’s total revenue and the cost of goods sold, expressed as a percentage of total revenue.

Variable Costing

An accounting method that records variable costs (costs that change with production levels) as product costs, while fixed costs are recorded as expenses in the period they are incurred.

Absorption Costing

A method in accounting that involves integrating all costs related to manufacturing, namely direct materials, direct labor, and all variable and fixed overhead expenses, into the pricing of a product.

Fixed Overhead

Costs that remain constant regardless of the level of production or sales activities, such as rent, salaries, and insurance.