Assuming That a Company Has a Policy of Paying Out

question 230

Multiple Choice

Assuming that a company has a policy of paying out a constant fraction of net income in the form of a cash dividends, calculate the addition to retained earnings given the following information: cash
Dividends = $3,000; net income = $15,000.

• A) $10,000
• B) $12,000
• C) $14,000
• D) $16,000
• E) $18,000

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Definitions:

ATC

ATC, or average total cost, is the sum of all production costs divided by the quantity of output produced, encompassing both fixed and variable costs.

MC

Stands for Marginal Cost, which is the change in total cost that arises when the quantity produced is incremented by one unit; it is a key concept in economic theory guiding decision-making on the optimal level of production.

Marginal Cost Curve

A graphical representation showing how the cost of producing one more unit of a good changes as production volume changes.

Demand Curve

A visual depiction that illustrates the correlation between a product or service's price and the amount consumers are willing to purchase at different price points.