Which of the Following Is True of Depreciation Cost

question 106

Multiple Choice

Which of the following is true of depreciation cost?

• A) Depreciation cost on equipment is irrelevant in decision making because depreciation on equipment that has already been purchased is a past cost.
• B) Depreciation cost on equipment is relevant in decision making because depreciation on equipment that has already been purchased is an opportunity cost.
• C) Depreciation cost on equipment is irrelevant in decision making because there is no cash transaction.
• D) Depreciation cost on equipment is irrelevant in decision making because depreciation on equipment that has already been purchased is an opportunity cost.

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Definitions:

Average Revenue Curve

Represents the relationship between the price of a product and the quantity sold, showing how revenue changes with varying levels of output.

Absorption Cost Pricing

A pricing method that includes all manufacturing costs (fixed and variable) in the cost of a product, plus a markup for profit.

Mark-Up Percentage

The percentage added to the cost of goods to cover overhead and profit, determining the selling price of a product.

Variable Manufacturing Cost

Costs that change with the level of production output, such as raw materials and direct labor, contrasted with fixed costs.