When AVC Eventually Increases as Output Increases, This Is Referred

question 126

Multiple Choice

When AVC eventually increases as output increases, this is referred to as the effect.

• A)diminishing returns
• B)spreading
• C)constant cost
• D)increasing returns

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Definitions:

Equivalent Units

A technique used in process costing that converts partially completed goods into a number of fully completed units.

Conversion Costs

The sum of direct labor and manufacturing overhead costs, representing the expenses incurred to convert raw materials into finished products.

FIFO Method

The First-In, First-Out method, an inventory valuation strategy where goods first added to inventory are the first ones to be sold.

Weighted-Average Method

An inventory costing method that calculates the cost of ending inventory and the cost of goods sold based on the average cost of all units available for sale during the period.