"A Good Business Decision Maker Will Never Sell a Product

question 113

Multiple Choice

"A good business decision maker will never sell a product for less than it costs to produce." This statement is

• A) true because diminishing returns always cause marginal costs to rise in the short run.
• B) false because diminishing returns always cause fixed costs to rise in the short run.
• C) true because it clearly differentiates between accounting profit and economic profit.
• D) false because a business decision maker may be covering his current variable costs even though he has failed to cover all previous production costs.

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Definitions:

Credit Sales

Sales transactions in which the purchase amount is charged to the buyer’s account, to be paid at a later date.

Finished Goods Inventory

The stock of completed products that are ready to be sold to customers.

Raw Materials Purchases

The total cost of materials bought for use in the production process, not including any indirect materials.

Raw Material Purchases

The total cost of raw materials bought by a company for use in production during a specific time period.