Which Statement Is True Concerning the Selection of the Level

question 18

Multiple Choice

Which statement is true concerning the selection of the level of activity used in the flexible budget?

• A)The activity level should be the same as actually achieved.
• B)The activity level should be the same as found in the master budget.
• C)Any activity level can be used in the flexible budget.
• D)The activity level should be the level which maximizes profit.

---

Definitions:

Zero Marginal Cost

The situation where producing an additional unit of a good or service does not increase the total cost of production.

Fixed Cost

Expenses that do not change with the level of output produced, such as rent, salaries, and insurance premiums.

Patent

A legal grant by a government to an inventor, giving the right to exclude others from making, using, or selling an invention for a certain number of years.

Fixed Cost

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance, remaining constant regardless of business activity volume.