Assume That You Have to Choose Between Two Apartments

question 26

Multiple Choice

Assume that you have to choose between two apartments. You can afford both of them, and they are both adequate for your needs. Which feature should you pay the MOST attention to if you want to maximize your satisfaction with the apartment a year after you have moved in?

• A)Rent: you should choose the cheapest apartment.
• B)Neighborhood quality: you should choose the most pleasant neighborhood with lots of things to do.
• C)Square footage: you should choose the biggest apartment.
• D)Both rent and square footage should affect your decision equally and more so than neighborhood quality.

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs, showing how much revenue contributes to covering fixed costs.

Fixed Budget

A budget that remains constant regardless of changes in the level of activity or volume, typically used for planning purposes.

Variable Costs

Outlays that fluctuate according to the amount of production or volume of sales.

Flexible Budget Performance Report

A report comparing actual operating results to a budget that adjusts with changes in the volume of activity.