If Temper Company, a Manufacturer of Mattresses, Was Considering Moving

question 22

Multiple Choice

If Temper Company, a manufacturer of mattresses, was considering moving its production facilities to China but decided against it because the additional costs of shipping the mattresses back to the U.S. would offset the cost savings associated with moving the production facilities, the increased costs associated with shipping would be an example of

• A) learning-curve economies.
• B) diseconomies of scale.
• C) economies of scale.
• D) competitive advantages.

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Definitions:

Discount Rate

The interest rate used to discount future cash flows to present value, often applied in investment and finance to determine the present worth of future cash flows.

Carrying Amounts

The amount at which an asset or liability is recognized in the balance sheet, after deducting any accumulated depreciation, impairment, or amortization.

Contingent Asset

A potential asset that may arise depending on the outcome of a future event, not recognized in financial statements until certain.

AASB 137

An Australian Accounting Standards Board standard related to the accounting for provisions, contingent liabilities, and contingent assets.