Use the Figure to Answer the Following Question(s)

question 71

Multiple Choice

Use the figure to answer the following question(s) .
Figure 9-4

At the market price of $6 in Figure 9-4, indicate the firm's total revenue and total cost at its profit-maximizing level of output.

• A) total revenue, $30 million; total cost, $22.5 million (approx.)
• B) total revenue, $30 million; total cost, $30 million
• C) total revenue, $40 million; total cost, $30 million
• D) total revenue, $48 million; total cost, $38 million (approx.)

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Definitions:

Variable Costing

An accounting method that includes only variable production costs as product costs, treating fixed manufacturing overhead as an expense of the period in which it is incurred.

Unit Product Cost

The total cost associated with producing a single unit of a product, including direct materials, direct labor, and allocated overhead.

Absorption Costing

A method of inventory costing that includes all manufacturing costs, both variable and fixed, in the cost of a finished product.

Variable Costing

An economic recording tactic that involves only variable manufacturing costs (direct materials, direct labor, and variable manufacturing overhead) in determining product costs.