When Determining Whether to Shut Down in the Short Run,a

question 373

Multiple Choice

When determining whether to shut down in the short run,a competitive firm should

• A) ignore fixed costs.
• B) ignore variable costs.
• C) ignore sunk costs.
• D) Both a and c are correct

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Definitions:

Equivalent Units

A concept used in cost accounting to standardize units of production, making them comparable despite being in different stages of completion.

Fabricating Department

A section within a manufacturing company where raw materials are assembled or processed into finished products.

Weighted-Average Method

An inventory costing method that calculates the cost of goods sold and ending inventory value based on the average cost of all items available for sale during the period.

Equivalent Unit

A concept in cost accounting used to allocate costs to partially completed goods, equating them to an amount of finished goods.