A fiRm Is Currently Operating at Full Capacity

question 98

Multiple Choice

A firm is currently operating at full capacity. Net working capital, costs, and all assets vary directly with sales. The firm does not wish to obtain any additional equity financing. The dividend payout
Ratio is constant at 40 percent. When the firm compiles a pro forma statement, the plug variable is
Most likely going to be:

• A) Accounts payable.
• B) Long-term debt.
• C) Fixed assets.
• D) Retained earnings.
• E) Common stock.

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Definitions:

Fixed Cost

Any cost that in total does not change when the firm changes its output.

Harvest Labor

The workforce engaged in the process of gathering ripe crops from the fields.

Marginal Cost

The cost of producing one additional unit of a product, critical for decision-making in production.

Total Cost

The sum of fixed and variable costs incurred in the production of goods or services.