Under GASB 34,enterprise Funds Must Be Used

question 65

Multiple Choice

Under GASB 34,enterprise funds must be used:

• A) When debt is backed solely by fees and charges.
• B) When a legal requirement exists that the cost of providing services for activity, including capital costs, be recovered through fees or charges.
• C) When a government has a policy to establish fees and charges to cover the cost of providing services for an activity.
• D) All of the above.

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Definitions:

Law of Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other variables remain constant.

Total Cost

The aggregate of expenses related to the manufacturing of products or provision of services, which includes costs that stay the same as well as those that vary.

Fixed Costs

Expenses that do not vary with the level of production or business activity, such as rent, salaries, and insurance premiums, remaining constant regardless of output.

Average Total Costs

The total costs of production divided by the quantity produced, representing the cost per unit of output.