If an Amusement Park That Is Highly Profitable During the Summer

question 253

Multiple Choice

If an amusement park that is highly profitable during the summer months is unable to cover its variable costs during the winter months, it should

• A) raise its prices during the winter months.
• B) lower its prices during the summer months.
• C) operate during the summer but shut down during the winter months.
• D) operate during all months of the year as long as its profits during the summer exceed its losses during the winter.

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Definitions:

Selling

The process of promoting and selling goods or services, including marketing and advertising strategies.

Administrative Expense

Expenses incurred in the process of running a company that are not directly tied to a specific product or service, such as salaries of senior executives.

Responsibility Accounting

A system of accountability in which managers are held responsible for those items of revenue and cost—and only those items—over which they can exert significant control. The managers are held responsible for differences between budgeted and actual results.

Significant Variances

Discrepancies between planned and actual figures that are large enough to warrant attention and possibly corrective action by management.