The Purpose of Calculating the Concentration Ratio Is

question 31

Multiple Choice

The purpose of calculating the concentration ratio is

• A)to obtain the firm's total profit.
• B)to obtain the firm's production cost.
• C)to measure the losses the firm incurred.
• D)to measure the extent to which the market is dominated by a small number of firms.
• E)to distinguish between the firm's total profit and production cost.

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Definitions:

Variable Selling

denotes the costs that vary directly with the level of sales, such as commissions or shipping charges.

Administrative Costs

Expenses related to the general administration of a business, such as salaries of executive staff, office supplies, and utilities.

Target Costing

A pricing approach where a company determines the potential selling price of a product and then subtracts desired profit to arrive at a target cost, subsequently focusing on reducing manufacturing costs to meet this target.

Return on Investment

A financial metric used to evaluate the efficiency or profitability of an investment, calculated by dividing the profit gained from an investment by the cost of the investment.