In the Long Run, a Profit-Maximizing Firm Will Choose to Exit

question 330

Multiple Choice

In the long run, a profit-maximizing firm will choose to exit a market when

• A)average fixed cost is falling.
• B)variable costs exceed sunk costs.
• C)marginal cost exceeds marginal revenue at the current level of production.
• D)total revenue is less than total cost.

Understand the role of product costs in inventory valuation, management decision making, and cost control.

Understand the differences and suitability of job costing and process costing for various manufacturing environments, including examples.

Identify and define key components of manufacturing costs such as materials, labor, and overheads.

Comprehend the reasons for using applied overhead in cost determination and its implications.

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Definitions:

Income Report

An income report, commonly known as an income statement, is a financial document that shows a company's revenue, expenses, and net income over a specific period.

Lease Payments

Regular payments made by a lessee to a lessor for the use of an asset during the lease term.

Constructively Capitalize

The accounting practice of recognizing an expenditure as a fixed asset and amortizing it over time, despite not being capitalized in a traditional sense.

Operating Leases

A pact that grants permission to use a property without bestowing ownership rights of the said asset.