Value-Added Activities

question 54

Multiple Choice

Value-added activities

• A)should be reduced or eliminated.
• B)involve resource usage customers are willing to pay for.
• C)add cost to a product without affecting selling price.
• D)cannot be differentiated from non-value-added activities.

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Definitions:

Fixed Cost

Costs that do not change with the level of production or output, such as rent, salaries, and loan payments.

Variable Cost

Costs that vary based on a company's operations, including outlays for materials needed for manufacturing or other production-related inputs.

Economic Profit

The difference between a firm's total revenue and its total costs, including both explicit and implicit costs, representing the additional value created by the firm.

Accounting Profit

Accounting profit is the financial gain calculated by subtracting total explicit costs from total revenue.