Assume a Firm Closes Down in the Short Run and Produces

question 160

Multiple Choice

Assume a firm closes down in the short run and produces no output. Under these conditions,

• A)TVC is positive, but TFC and TC are zero.
• B)TFC is positive, but TVC and TC are zero.
• C)TFC and TC are positive, but TVC is zero.
• D)TFC, TVC, and TC will all be positive.

---

Definitions:

Sequential Method

A process approach where tasks or operations are performed one after another in a specific order.

ABC

Activity-Based Costing, a method of assigning overhead and indirect costs to specific products or activities based on their use of resources.

Step-Down Method

A method of allocating support department costs to production departments that considers some inter-support-department services in a sequential or step-down fashion. Also known as the sequential method.

Direct Method

A method of preparing the cash flow statement where major classes of gross cash receipts and payments are disclosed.