When Making Pricing Decisions Managers Should Include Fixed Cost Per

question 89

Multiple Choice

When making pricing decisions managers should include fixed cost per unit in the cost because ________.

• A) it leads to reporting higher operating income for the period
• B) it allows managers to report positive contribution as long as prices are above variable costs
• C) in the long run, the price of a product must exceed the full cost of the product
• D) it requires the management accountant to perform a detailed analysis of cost-behavior patterns to separate product costs into variable and fixed components

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Definitions:

Stockholders' Equity

The value remaining in a company after liabilities are subtracted from assets, representing what is owned by the shareholders.

Debt-to-Equity Ratio

This ratio demonstrates the balance between debt and equity shareholders' equity in financing a company's resources.

Balance Sheet

A financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time.

Accounts Receivable

This is the balance of money due to a firm for goods or services delivered or used but not yet paid for by customers.