Rambo Footwear Is a Chinese Shoe Manufacturing Company

question 34

Multiple Choice

Rambo Footwear is a Chinese shoe manufacturing company.The company spends a large amount to buy machinery for a new plant that it has set up.Instead of adding this in the current year's expense the company's accounting spreads the cost over a period of fifteen years.This accounting practice of spreading costs is called ________.

• A) accrual basis
• B) depreciation
• C) amortization
• D) cash basis
• E) cash balancing

---

Definitions:

ATC

Average Total Cost; the sum of all production costs divided by the quantity of output, representing the cost per unit including both fixed and variable costs.

Monopoly Power

The exclusive ability of a company to determine the price and production level of a product or service in the market.

Marginal Revenue

The gain in revenue resulting from the sale of one extra unit of a good or service.

Marginal Cost

The price of making an additional unit of a product or service.