Figure 7-10 -The Typical Average Cost Curve

question 226

Multiple Choice

Figure 7-10
-The typical average cost curve

• A)continually declines as output increases.
• B)is horizontal.
• C)continually increases as output increases.
• D)first declines to a minimum and then increases as output increases.

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Definitions:

Absorption Costing

An approach to calculating costs that encompasses all expenses related to production, including direct materials, direct labor, and all manufacturing overheads, whether they are variable or fixed, within a product's cost.

Variable Costing

A cost accounting method that only allocates variable production costs to products, while fixed costs are treated as period expenses.

Net Income

The net earnings of a business once all costs, taxes, and expenses have been deducted from its total income.

Inventory

The total amount of goods a company holds in stock, including raw materials, work-in-progress, and finished goods.