At What Level of Output Will Average Variable Cost Equal

question 482

Multiple Choice

At what level of output will average variable cost equal average total cost?

• A)when marginal cost equals average total cost
• B)for all levels of output in which average variable cost is falling
• C)when marginal cost equals average variable cost
• D)There is no level of output where this occurs, as long as fixed costs are positive.

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Definitions:

Finished Goods

The inventory that has completed all stages of production and is ready to be sold to customers.

Advertising Expense

The cost incurred by an organization to promote its products, services, or brand in various media.

Underapplied

A situation where the allocated manufacturing overhead costs are less than the actual overhead costs incurred, leading to a cost variance.

Manufacturing Overhead

All indirect costs related to the manufacturing process, including but not limited to utilities, rent, and maintenance of equipment.