If the Marginal Cost of Adding a New Line of Products

question 37

Multiple Choice

If the marginal cost of adding a new line of products is $10 million, then Amazon should add the product

• A) if marginal costs fall.
• B) if marginal benefits fall.
• C) if marginal benefits are less than $10 million.
• D) if marginal benefits are more than $10 million.
• E) if Amazon does not operate at a loss.

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Definitions:

Variable Costing

An accounting method that includes only variable production costs (costs that change with the level of output) in the cost of goods sold, highlighting the impact of production volume on profitability.

Variable Costing

An accounting method that includes only variable costs—costs that change with production levels—in the cost of production.

Absorption Costing Reports

A financial document that includes all the manufacturing costs associated with the production of goods, both variable and fixed costs.

Variable Costing

An accounting method that includes only variable production costs in product cost, excluding fixed manufacturing overhead.