Which of the Following Characterizes the Variable-Cost Pricing Approach

question 48

Multiple Choice

Which of the following characterizes the variable-cost pricing approach?

• A) In this approach, prices are often set on a cost-plus basis, that is, total costs plus a profit margin.
• B) This approach insists that no unit of a similar product is different from any other unit in terms of cost.
• C) This approach insists that each unit must bear its full share of the total fixed and variable cost.
• D) This approach is suitable when a company has high variable costs relative to its fixed costs.
• E) In this approach, any contribution to fixed cost after variable costs are covered is profit to the company.

Understand the treatment and reporting of noncash investing and financing activities in the statement of cash flows.

Analyze the impact of changes in current and non-current accounts on cash flows.

Understand the different types of taxes (proportional, progressive, regressive) and their impacts.

Identify the roles and responsibilities of government in economic systems.

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Definitions:

Equity Costs

The cost of obtaining capital through the sale of shares in the company, including dividends payouts and the dilution of share value.

Debt Costs

The total expenses involved in borrowing money, including interest payments and fees.

Flotation Costs

The expenses incurred by a company in issuing new securities, including legal, accounting, and underwriting fees.

WACC

Abbreviation for Weighted Average Cost of Capital, a calculation of a firm's cost of capital in which each category of capital is proportionately weighted, reflecting the cost of each type of capital (debt, equity, etc.) to the overall business.