A Disadvantage of the Weighted-Average Method Is That

question 62

Multiple Choice

A disadvantage of the weighted-average method is that:

• A) current prices have no more significance than prices of goods bought a month earlier.
• B) net income will not fluctuate as much as with other methods.
• C) it takes into account the number of units purchased at each amount, not a simple average cost.
• D) All of the above is correct.

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Definitions:

Variable Costs

Expenses that change in proportion to the activity of a business.

Fixed Costs

Expenses that do not change with the level of output or sales in the short term.

Marginal Cost Curve

Graphical representation showing how the cost to produce one more unit changes as production increases, typically U-shaped due to economies and diseconomies of scale.

Average Total Cost Curve

A graphical representation showing the average cost per unit of output, calculated by dividing total costs (both fixed and variable) by the number of units produced.