Cutting Edge Inc

question 39

Multiple Choice

Cutting Edge Inc. makes and sells tools. One of the tools is believed to be hazardous. The firm may be required to​

• A) ​export the tool and sell it only abroad.
• B) ​increase the price to cover the cost of any injuries or damage.
• C) ​reduce the price to indicate the hazard to consumers.
• D) ​remove the tool from the market.

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Definitions:

Full Costing Income (FCI)

A method of accounting in which all manufacturing costs, both fixed and variable, are assigned to produced units to calculate profitability.

Step-fixed Costs

Costs that remain constant for a certain level of production or activity, but can change to a different fixed amount when a certain threshold is crossed.

Variable Costs

Costs that vary directly with the level of production or output.

Absorption Costing

An accounting method that includes all manufacturing costs—direct materials, labor, and both variable and fixed overhead—as part of the cost of a finished product.